On April 1, 2015,
Jiro Nozomi created a new travel agency, Adventure Travel. The following
transactions occurred during the company’s first month.
April 1 Nozomi
invested $30,000 cash and computer equipment worth $20,000 in the company.
2 The company rented
furnished office space by paying $1,800 cash for the first month’s (April)
rent.
3 The company
purchased $1,000 of office supplies for cash.
10 The company paid
$2,400 cash for the premium on a 12-month insurance policy. Coverage begins on
April 11.
14 The company paid
$1,600 cash for two weeks’ salaries earned by employees.
24 The company
collected $8,000 cash on commissions from airlines on tickets obtained for customers.
28 The company paid
$1,600 cash for two weeks’ salaries earned by employees.
29 The company paid
$350 cash for minor repairs to the company’s computer.
30 The company paid
$750 cash for this month’s telephone bill.
30 Nozomi withdrew
$1,500 cash from the company for personal use.
The company’s chart
of accounts follows:
101 Cash 405
Commission Earned
106 Accounts receivable 612 Depreciation Exp
(Computer)
124 Office Supplies 622 Salaries
Expense
128 Prepaid Insurance 637 Insurance Expense
167 Computer Equipment 640 Rent Expense
168 Accumulated Depreciation(Computer) 650
Office Supplies Expense
209 Salaries payable 684 Repair
Expense
301 J. Nazami Capital 688 Telephone
Expense
302 J. Nazami withdrawals 901
Income Summary
Required
4. Use the following
information to journalize and post adjusting entries for the month:
a. Two-thirds (or $133) of one month’s
insurance coverage has expired.
b. At the end of the month, $600 of office
supplies are still available.
c. This month’s
depreciation on the computer equipment is $500.
d. Employees earned
$420 of unpaid and unrecorded salaries as of month-end.
e. The company earned
$1,750 of commissions that are not yet billed at month-end.
5. Prepare the
adjusted trial balance as of April 30. Prepare the income statement and the
statement of owner’s equity for the month of April and the balance sheet at
April 30, 2015.
Part
4
Adjusting
entries
(a) Apr 30 Insurance Expense.............................................................
637 133
Prepaid
Insurance......................................................
128 133
To record expired
insurance ($2,400/12 x2/3).
(b) 30 Office Supplies Expense....................................................
650 400
Office
Supplies............................................................
124 400
To
record cost of supplies used ($1,000 - $600).
(c) 30 Depreciation Exp—Computer Equipment....................... 612 500
Accum.
Depreciation—Computer Equip.................
168 500
To
record depreciation.
(d)
30 Salaries Expense.................................................................
622 420
Salaries
Payable.........................................................
209 420
To record accrued salaries.
(e) 30 Accounts Receivable..........................................................
106 1,750
Commissions
Earned.................................................
405 1,750
To
record accrued commissions.
ADVENTURE TRAVEL
Adjusted Trial Balance
April 30, 2015
No. Account
Title Debit Credit
101 Cash...................................................................... $27,000
106 Accounts
receivable............................................ 1,750
124 Office
supplies..................................................... 600
128 Prepaid
insurance............................................... 2,267
167 Computer
equipment.......................................... 20,000
168 Accumulated
depreciation—.............................
Computer equipment......................................... $ 500
209 Salaries
payable.................................................. 420
301 J.
Nozomi, Capital................................................ 50,000
302 J.
Nozomi, Withdrawals...................................... 1,500
405 Commissions
earned.......................................... 9,750
612 Depreciation
expense—
Computer equipment......................................... 500
622 Salaries
expense................................................. 3,620
637 Insurance
expense............................................. 133
640 Rent
expense....................................................... 1,800
650 Office
supplies expense..................................... 400
684 Repairs
expense.................................................. 350
688 Telephone
expense............................................ 750
Totals..................................................................... $60,670
$60,670
Part
5
ADVENTURE TRAVEL
Income Statement
For Month Ended April 30, 2015
Commissions earned.................................................................. $9,750
Expenses
Depreciation
expense—Computer equipment..................... $ 500
Salaries expense....................................................................... 3,620
Insurance expense................................................................... 133
Rent expense............................................................................. 1,800
Office supplies expense........................................................... 400
Repairs expense........................................................................ 350
Telephone expense..................................................................
750
Total expenses........................................................................... 7,553
Net income.................................................................................... $2,197
ADVENTURE TRAVEL
Statement of Owner’s Equity
For Month Ended April 30, 2015
J. Nozomi, Capital, April 1, 2015................................ $ 0
Add: Owner investments........................................... $50,000
Net Income..........................................................
2,197
52,197
Less: Withdrawals....................................................... (1,500)
J. Nozomi, Capital, April 30, 2015.............................. $50,697
ADVENTURE TRAVEL
Balance Sheet
April 30, 2015
Assets
Cash....................................................................................... $27,000
Accounts receivable............................................................ 1,750
Office supplies...................................................................... 600
Prepaid insurance............................................................... 2,267
Computer equipment........................................................... $20,000
Accumulated depreciation–Computer equipment......... (500)
19,500
Total assets........................................................................... $51,117
Liabilities
Salaries
payable................................................................... $ 420
Equity
J. Nozomi, Capital................................................................ 50,697
Total
liabilities and equity................................................... $51,117
