Problem 3-6A Applying the accounting cycle LO PL, P2 P3, P4, P5 On April 1. 2017

Question

Problem 3-6A Applying the accounting cycle LO PL, P2 P3, P4, P5 On April 1. 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during first month. April 1 Nozomi invested $36,000 cash and computer equipment worth $20.000 in the company in exchange for common stock 2 The company rented furnished office space by paying $1,800 cash for the first month's (April) rent. 3 The company purchased $1,300 of office supplies for cash 10 The company paid $2,300 cash for the premium on a 12-month insurance policy. Coverage begins on April 11. 14 The company paid $1,800 cash for two weeks' salaries earned by employees. 24 The company collected $21,500 cash on commissions from airlines on tickets obtained for customers 28 The company paid $1,800 cash for two weeks' salaries earned by employees. 29 The company paid $450 cash for minor repairs to the company's computer. 30 The company paid $900 cash for this month's telephone bill. 30 The company paid $2,000 cash in dividends. The company's chart of accounts follows 405 Commissions Eaned 612 Depreciation Expense -Computer Equip. 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 650 Office Supplies Expense 684 Repairs Expense 688 Telephone Expense 901 Income Summary 101 Cash 106 Accounts Receivable 124 Office Supplies 128 Prepaid Insurance 167 Computer Equipment 168 Accumulated Equip 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends Use the following information: a. Two-thirds (or $128) of one month's insurance coverage has expired. b. At the end of the month, $700 of office supplies are still available. c This month's depreciation on the computer equipment is $500. d. Employees earned $320 of unpaid and unrecorded salaries as of month-end. e. The company earned $2,100 of commissions that are not yet billed at month-end. Required: 1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement company records prepaid and unearned items in balance sheet accounts 3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30. 4. Journalize and post the adjusting entries for the month and prepare the adjusted trial balance. 5a. Prepare the income statement for the month of April 30, 2017 Sb. Prepare the statement of retained earnings for the month of April 30, 2017. 5c. Prepare the balance sheet at April 30, 2017 6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b 6b. Post the journal entries to the ledger. 7. Prepare a post-closing trial balance.

Explanation / Answer

Adventure Travel General journal for the month of April 2017 Date Account Title Debit Credit 4/1/2017 Cash 36000 Computer Equipment 20000 Common Stock 56000 (Investment made ) 4/2/2017 Rent expense 1800 Cash 1800 (Rent paid for April) 4/3/2017 Office supplies 1300 Cash 1300 (Office supplies purchase for cash) 4/10/2017 Prepaid Insurance 2300 Cash 2300 (Cash paid for 12-month insurance policy) 4/14/2017 Salaries expense 1800 Cash 1800 (Cash paid for two weeks' salaries) 4/24/2017 Cash 21500 Commission earned 21500 (Cash received for commission earned) 4/28/2017 Salaries expense 1800 Cash 1800 (Cash paid for two weeks' salaries) 4/29/2017 Repairs expense 450 Cash 450 (Cash paid for repairs expense) 4/30/2017 Telephone expense 900 Cash 900 (Cash paid for telephone expense) 4/30/2017 Dividends 2000 Cash 2000 (Cash paid for dividends) Adventure Travel Adjustment entries for the month of April, 2017 Date Account Title Debit Credit 4/30/2017 Insurance expense 128 Prepaid expense 128 (Insurance expired recorded) Office supplies expense 600 Office supplies 600 (Office supplies expense recorded) Depreciation expense 500 Accumulated depreciation - Computer Equip. 500 (Depreciation expense recorded) Salaries expense 320 Salaries payable 320 (Unpaid and accrued salaries recorded) Accounts Receivable 2100 Commission earned 2100 (Unbilledcommission revenue recorded) Adventure Travel Closing entries for the month of April, 2017 Date Account Title Debit Credit 4/30/2017 Commission earned 23600 Income summary 23600 (Entry to close revenue account) Income summary 8298 Salaries Expense 3920 Rent Expense 1800 Telephone Expense 900 Depreciation expense 500 Office supplies expense 600 Repairs expense 450 Insurance expense 128 (Entry to close expense accounts) Income summary 15302 Retained Earnings 15302 (Entry to close income summary) Retained Earnings 2000 Dividends 2000 (Entry to close dividends account) Cash Accounts Receivable Date Details Debit Credit Balance Date Details Debit Credit Balance 4/1/2017 36000 36000 4/30/2017 Adj.5 2100 2100 4/2/2017 1800 34200 2100 4/3/2017 1300 32900 2100 4/10/2017 2300 30600 4/14/2017 1800 28800 4/24/2017 21500 50300 Office Supplies 4/28/2017 1800 48500 Date Details Debit Credit Balance 4/29/2017 450 48050 4/3/2017 1300 1300 4/30/2017 900 47150 4/30/2017 600 700 4/30/2017 2000 45150 700 Prepaid Insurance Computer Equipment Date Details Debit Credit Balance Date Details Debit Credit Balance 4/10/2017 2300 2300 4/1/2017 20000 20000 4/30/2017 Adj.1 128 2172 20000 2172 20000 Accumulated Depreciation - Computer Eqpt. Salaries Payable Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 Adj.3 500 500 4/30/2017 Adj.4 320 320 Common Stock Retained Earnings Date Details Debit Credit Balance Date Details Debit Credit Balance 4/1/2017 56000 56000 4/30/2017 Clg. 15302 15302 4/30/2017 Clg. 2000 13302 Dividends Commission Earned Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 2000 2000 4/24/2017 21500 21500 4/30/2017 Clg. 2000 0 4/30/2017 Adj.5 2100 23600 0 4/30/2017 Clg. 23600 0 Depreciation Expense - Computer Eqpt. Salaries Expense Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 Adj.3 500 500 4/14/2017 1800 1800 4/30/2017 Clg. 500 0 4/28/2017 1800 3600 0 4/30/2017 Adj.4 320 3920 4/30/2017 Clg. 3920 0 Insurance Expense Rent Expense Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 Adj.1 128 128 4/2/2017 1800 1800 4/30/2017 Clg. 128 0 4/30/2017 Clg. 1800 0 1800 Office Supplies Expense Repairs Expense Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 Adj.2 600 600 4/29/2017 450 450 4/30/2017 Clg. 600 0 4/30/2017 Clg. 450 0 0 0 Telephone Expense Income Summary Date Details Debit Credit Balance Date Details Debit Credit Balance 4/30/2017 900 900 4/30/2017 Clg. 23600 23600 4/30/2017 Clg. 900 0 4/30/2017 Clg. 3920 19680 0 4/30/2017 Clg. 1800 17880 4/30/2017 Clg. 900 16980 4/30/2017 Clg. 600 16380 4/30/2017 Clg. 500 15880 4/30/2017 Clg. 450 15430 4/30/2017 Clg. 128 15302 4/30/2017 Clg. 15302 0 Adventure Travel Income statement for the month ending April30, 2017 Commission Earned 23600 Expenses: Salaries Expense 3920 Rent Expense 1800 Telephone Expense 900 Depreciation expense 500 Office supplies expense 600 Repairs expense 450 Insurance expense 128 Total expenses 8298 Net Income 15302 Adventure Travel Statement of retained earnings for the month of April 2017 Balance as at April 1, 2017 0 Add: Net income for the month 15302 Less: Dividend paid 2000 Balance as at April 30, 2017 13302 Adventure Travel Balance sheet as at April 30, 2017 Assets Cash 45150 Accounts receivable 2100 Office supplies 700 Prepaid expenses 2172 Total current asets 50122 Computer equipment 20000 Less: Accumulated depreciation 500 19500 Total Assets 69622 Liabilities and stockholders' equity Salaries payable 320 Common stock 56000 Retained earnings 13302 Total liabilities and equity 69622 Adventure Travel Worksheet for the month ending April 30, 2017 Account Post Closing Trial balance Debit Credit Cash 45150 Accounts Receivable 2100 Office Supplies 700 Prepaid Expenses 2172 Computer Equipment 20000 Accumulated Depreciation - Computer Equip. 500 Salaries Payable 320 Common stock 56000 Retained Earnings 13302 Dividends Commissions earned Depreciation expense - Computer Equip. Salaries Expense Insurance Expense Rent Expense Office Supplies expense Repairs Expense Telephone Expense T O T A L 70122 70122

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