Problem 3-5A Applying the accounting cycle LO P1, P2, P3, P4, P5, P6, P7, P8 On April 1, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company's first month. April 1 Nozomi invested $46,000 cash and computer equipment worth $20,000 in the company in exchange for common stock. 2 The company rented furnished office space by paying $2,500 cash for the first month's (April) rent. 3 The company purchased $1,800 of office supplies for cash. 10 The company paid $2,100 cash for the premium on a 12-month insurance policy. Coverage begins on April 11. 14 The company paid $1,400 cash for two weeks' salaries earned by employees. 24 The company collected $12,500 cash for commissions earned. 28 The company paid $1,400 cash for two weeks' salaries earned by employees. 29 The company paid $400 cash for minor repairs to the company's computer. 30 The company paid $1,500 cash for this month's telephone bill. 30 The company paid $2,400 cash in dividends. The company's chart of accounts follows: 101 Cash 106 Accounts Receivable 124 Office Supplies 128 Prepaid Insurance 167 Computer Equipment 168 Accumulated Depreciation-Computer Equip. 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends 405 Commissions Earned 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 Use the following information: a. Prepaid insurance of $117 has expired this month. b. At the end of the month, $400 of office supplies are still available. C. This month's depreciation on the computer equipment is $500. d. Employees earned $400 of unpaid and unrecorded salaries as of month-end. e. The company earned $2,350 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 6b. The 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 the adjusting entries for the month and prepare the adjusted trial balance. 5a. Prepare the income statement for the month of April 30. 5b. Prepare the statement of retained earnings for the month of April 30. 5c. Prepare the balance sheet at April 30. 6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b. 6b. Post the journal entries to the ledger. No Date General Journal Debit Credit 1 April 01 Cash 46,000 20,000 Computer equipment Common stock 66,000 2 April 02 Rent expense 2,500 Cash 2,500 3 April 03 1,800 Office supplies Cash 1,800 4 April 10 2,100 Prepaid insurance Cash 2,100 5 April 14 Salaries expense 1,400 Cash 1,400 6 April 24 12,500 Cash Commissions earned 12,500 7 April 28 Salaries expense 1,400 Cash 1,400 8 April 29 Repairs expense 400 Cash 400 9 April 30 Telephone expense 1,500 Cash 1,500 10 April 30 Dividends 2,400 Cash 2,400 ADVENTURE TRAVEL Unadjusted Trial Balance April 30 Account Title Debit Credit 101: Cash 106: Accounts receivable 1,800 2,100 20,000 124: Office supplies 128: Prepaid insurance 167: Computer equipment 168: Accumulated depreciationComputer equipment 209: Salaries payable 307: Common stock 318: Retained earnings $ 66,000 319: Dividends 2,400 12,500 405: Commissions earned 612: Depreciation expense-Computer equipment 622: Salaries expense 637: Insurance expense 2,800 2,500 640: Rent expense 650: Office supplies expense 684: Repairs expense 688: Telephone expense 400 1,500 33,500 Total $ $ 78,500 No Transaction General Journal Debit Credit 1 a. Insurance expense 117 Prepaid insurance 117 2 b. 1,400 Office supplies expense Office supplies 1,400 3 C. 500 Depreciation expense Computer equip. Accumulated depreciationComputer equip. 500 4 d. Salaries expense 400 Salaries payable 400 5 e. Accounts receivable 2,350 Commissions earned 2,350 ADVENTURE TRAVEL Adjusted Trial Balance April 30 Account Title Debit Credit 101: Cash 106: Accounts receivable 2,350 1,400 2,100 20,000 124: Office supplies 128: Prepaid insurance 167: Computer equipment 168: Accumulated depreciationComputer equipment 209: Salaries payable 307: Common stock 318: Retained earnings 319: Dividends 66,000 2,400 405: Commissions earned 12,500 500 612: Depreciation expense-Computer equipment 622: Salaries expense 3,200 637: Insurance expense 117 2,500 1,800 640: Rent expense 650: Office supplies expense 684: Repairs expense 688: Telephone expense Total 400 1,500 38,267 $ $ 78,500 ADVENTURE TRAVEL Income Statement For Month Ended April 30 Revenues: Commissions earned $ 12,500 Expenses: Depreciation expense-Computer equip. 500 Salaries expense 3,200 Insurance expense 117 Rent expense Telephone expense Office supplies expense Repairs expense 2,500 1,500 1,800 400 Total expenses 10,017 2,483 Net income $ ADVENTURE TRAVEL Statement of Retained Earnings For Month Ended April 30 Retained earnings, April 1 $ 0 Add: Net income 2,483 2,483 Less: Dividends 2,400 83 Retained earnings, April 30 $ ADVENTURE TRAVEL Balance Sheet April 30 Assets Total assets $ 0 0 Total equity Total liabilities and equity 0 Date General Journal Debit Credit April 30 101: Cash 106: Accounts Receivable Debit Credit Date Debit Credit Balance Date Balance 124: Office Supplies Debit Credit 128: Prepaid Insurance Debit Credit Date Balance Date Balance 167: Computer Equipment Debit Credit 168: Accumulated Depreciation Computer equipment Debit Credit Balance Date Balance Date 209: Salaries Payable Debit Credit 307: Common Stock Debit Credit Date Balance Date Balance 318: Retained Earnings Debit Credit 319: Dividends Debit Credit Date Balance Date Balance 405: Commissions Earned 612: Depreciation ExpenseComputer Equipment Date Debit Credit Balance Date Debit Credit Balance 622: Salaries Expense Debit Credit 637: Insurance Expense Debit Credit Date Balance Date Balance 650: Office Supplies Expense 640: Rent Expense Debit Credit Date Balance Date Debit Credit Balance 684: Repairs Expense Debit Credit 688: Telephone Expense Debit Credit Date Balance Date Balance 901: Income Summary Debit Credit Date Balance ADVENTURE TRAVEL Post-Closing Trial Balance April 30 Account Title Debit Credit Totals $ 0 $ 0