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On April 1, 2017, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.

Apr. 1 Nozomi invested \(30,000 cash and computer equipment worth \)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 \)1,000 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.

30 The company paid \(750 cash for this month’s telephone bill.

30 The company paid \)1,500 cash in dividends.

The company’s chart of accounts follows:

101 Cash 405 Commissions Earned

106 Accounts Receivable 612 Depreciation Expense — Computer Equip.

124 Office Supplies 622 Salaries Expense

128 Prepaid Insurance 637 Insurance Expense

167 Computer Equipment 640 Rent Expense

168 Accumulated Depreciation—Computer Equip.650 Office Supplies Expense

209 Salaries Payable 684 Repairs Expense

307 Common Stock 688 Telephone Expense

318 Retained Earnings 901 Income Summary

319 Dividends

Required

1. Use the balance column format to set up each ledger account listed in its chart of accounts.

2. Prepare journal entries to record the transactions for April and post them to the ledger accounts. The

company records prepaid and unearned items in balance sheet accounts.

3. Prepare an unadjusted trial balance as of April 30.

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

retained earnings for April and the balance sheet at April 30, 2017.

6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.

7. Prepare a post-closing trial balance

Short Answer

Expert verified

The total adjusted trial balance is $60,670

Step by step solution

01

Definition of adjusted trial balance

Adjusted trial balance is the trial balance that is prepared after adjustment entries.

02

Adjusted trial balance

Adventure Travel

Adjusted Trial Balance

April 30, 2017

Debit

Credit

Cash

$27,000

Accounts Receivable

$1,750

Office Supplies

$600

Prepaid Insurance

$2,267

Computer

$20,000

Accumulated Depreciation-Computer

$500

Salaries Payable

$420

Capital

$50,000

Withdrawal

$1,500

Commission Earned

$9,750

Depreciation Expense- Equipment

$500

Salaries Expense

$3,620

Insurance Expense

$133

Rent Expense

$1,800

Office Supplies Expense

$400

Repairs Expense

$350

Telephone Expense

$750

Totals

$60,670

$60,670

03

Income Statement

Adventure Travel

Income Statement

Year ending December 31, 2017

Commission Earned

$9,750

Less:

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

$7,553

Net Income

$2,197

04

Statement of retained earnings

Adventure Travel

Statement of Retained Earnings

For Year Ending April 30, 2017

J. Nozomi Capital, April 1, 2017

$0

Add: Net Income

$2,197

Add: Owner Investment

$50,000

$52,197

Less: Withdrawal

$1,500

J. Nozomi Capital, April 30, 2017

$50,697

05

Balance Sheet

Adventure Travel

Balance Sheet

For the year ending April 30, 2017

Assets

Current Assets:

Cash

$27,000

Accounts Receivable

$1,750

Prepaid Insurance

$600

Office Supplies

$2,267

Non-Current Assets

Equipment

$20,000

Accumulated Depreciation

-$500

Total Assets

$51,117

Liabilities

Current Liabilities

Salaries Payable

$420

Stockholder’s Equity

J. Nozomi Capital

$50,697

Total liabilities & Stockholder’s Equity

$51,117

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Most popular questions from this chapter

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

19. Office supplies

Garcia Company had the following selected transactions during the year. (A partial chart of accounts follows:

Cash; Accounts Receivable; Prepaid Insurance; Wages Payable; Unearned Revenue; Revenue;

Wages Expense; Insurance Expense; Depreciation Expense.)

Jan. 1 The company paid \(6,000 cash for 12 months of insurance coverage beginning immediately for

the calendar year.

Aug. 1 The company received \)2,400 cash in advance for 6 months of contracted services beginning

on August 1 and ending on January 31.

Dec. 31 The company prepared any necessary year-end adjusting entries related to insurance coverage

and services rendered.

a. Record journal entries for these transactions assuming Garcia follows the usual practice of recording a

prepayment of an expense in an asset account andrecording a prepayment of revenue received in a

liability account.

b. Record journal entries for these transactions assuming Garcia follows the alternative practice of recording

a prepayment of an expense in an expense account andrecording a prepayment of revenue

received in a revenue account.

Question:Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the

following separate cases. (Entries can draw from the following partial chart of accounts: Cash; Accounts

Receivable; Interest Receivable; Equipment; Wages Payable; Salary Payable; Interest Payable; Lawn

Services Payable; Unearned Revenue; Revenue; Interest Revenue; Wages Expense; Salary Expense;

Supplies Expense; Lawn Services Expense; Interest Expense.)

a. M&R Company provided \(2,000 in services to customers that are expected to pay the company sometime

in January following the company’s year-end.

b. Wage expenses of \)1,000 have been incurred but are not paid as of December 31.

c. M&R Company has a \(5,000 bank loan and has incurred (but not recorded) 8% interest expense of

\)400 for the year ended December 31. The company will pay the \(400 interest in cash on January 2

following the company’s year-end.

d. M&R Company hired a firm to provide lawn services at a monthly fee of \)500 with payment occurring

on the 15th of the following month. Payment for December services will occur on January 15

following the company’s year-end.

e. M&R Company has earned \(200 in interest revenue from investments for the year ended December

31. The interest revenue will be received on January 15 following the company’s year-end.

f. Salary expenses of \)900 have been earned by supervisors but not paid as of December 31.

What is a company’s operating cycle?

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

1. Commissions earned

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