Chapter 4, Problem 2GLP

To determine

Adjusting Entries:

The journal entries framed to realize the revenues and expense for the specified accounting period are called adjusting entries.

Income Statement:

The statement which shows the revenues earned and expenses incurred during a particular year is called Income statement.

Statement of Owner’s Equity:

The statement which shows changes in the owners’ equity due to net income or loss and owners’ withdrawal during the accounting period is called statement of owner’s equity.

Balance Sheet:

A financial statement which shows the financial position of a company during specified accounting period is called a balance sheet.

Closing Entries:

The journal entries prepare to close all the temporary accounts at the end of the accounting period is called closing entries.

To determine:

Prepare closing entries, create the income statement and the classified balance sheet, and then indicate which accounts appear on the post-closing trial balance.

Answer to Problem 2GLP

Solution:

Closing Entries

Date	Accounts	Debit	Credit
Apr. 30	Commissions Earned	$9,750
	Income Summary		$9,750
Apr. 30	Income Summary	$7,553
	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
Apr. 30	Income Summary	$2,197
	J. Nozomi, Capital		$2,197
Apr. 30	J. Nozomi, Capital	$1,500
	J. Nozomi, Withdrawals		$1,500

ADVENTURE TRAVEL Income Statement April 30, 2017
Revenues:
Storage Fees 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 Expense		$7,553
Net Income		$2,197

ADVENTURE TRAVEL Statement of Owner’s Equity April 30, 2017
J. Nozomi, Capital, April 1.	$0
Owner’s contribution during the month	$50,000
Net income for the month	$2,197
Subtotal	$52,197
Owner’s withdrawal	($1,500)
J. Nozomi, Capital, April 30.	$50,697

ADVENTURE TRAVEL Balance Sheet April 30, 2017
Assets
Current Asset:
Cash	$27,000
Accounts Receivable	$1,750
Office Supplies	$600
Prepaid Insurance	$2,267
Total Current Assets		$31,617
Plant, Property and Equipment:
Computer Equipment	$20,000
Accumulated Depreciation - Computer Equipment	$500	$19,500
Total Assets		$51,117
Liabilities
Current Liabilities:
Salaries Payable		$420
Owner’s Equity
J. Nozomi, Capital		$50,697
Total Liabilities and Owner’s Equity		$51,117

ADVENTURE TRAVEL Trial Balance April 30, 2017
	Unadjusted		Adjusted		Post-Closing
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$27,000		$27,000		$27,000
Accounts Receivable	$0		$1,750		$1,750
Office Supplies	$1,000		$600		$600
Prepaid Insurance	$2,400		$2,267		$2,267
Computer Equipment	$20,000		$20,000		$20,000
Accumulated Depreciation – Computer Equipment		$0		$500		$500
Salaries Payable		$0		$420		$420
J. Nozomi, Capital		$50,000		$50,000		$50,697
J. Nozomi, Withdrawals	$1,500		$1,500
Storage Fees Earned		$8,000		$9,750
Depreciation Expense – Computer Equipment	$0		$500
Salaries Expense	$3,200		$3,620
Insurance Expense	$0		$133
Rent Expense	$1,800		$1,800
Office Supplies Expense	$0		$400
Repairs Expense	$350		$350
Telephone Expense	$750		$750
Income Summary		$0		$0
Total	$58,000	$58,000	$60,670	$60,670	$51,617	$51,617

Explanation of Solution

Explanation

Journal entries for April’s transaction

Date	Accounts	Debit	Credit
Apr. 1	Cash	$30,000
	Computer Equipment	$20,000
	J. Nozomi, Capital		$50,000
2	Rent Expense	$1,800
	Cash		$1,800
5	Office Supplies	$1,000
	Cash		$1,000
10	Prepaid Insurance	$2,400
	Cash		$2,400
14	Salaries Expense	$1,600
	Cash		$1,600
24	Cash	$8,000
	Commissions Earned		$8,000
28	Salaries Expense	$1,600
	Cash		$1,600
29	Repair Expense	$350
	Cash		$350
30	Telephone Expense	$750
	Cash		$750
30	J. Nozomi, Withdrawals	$1,500
	Cash		$1,500

Ledgers

Cash Account No. 101
Date	Debit	Credit	Balance
Apr. 1	$30,000		$30,000
2		$1,800	$28,200
5		$1,000	$27,200
10		$2,400	$24,800
14		$1,600	$23,200
24	$8,000		$31,200
28		$1,600	$29,600
29		$350	$29,250
30		$750	$28,500
30		$1,500	$27,000

Accounts Receivable Account No. 106
Date	Debit	Credit	Balance

Office Supplies Account No. 124
Date	Debit	Credit	Balance
Apr. 5	$1,000		$1,000

Prepaid Insurance Account No. 128
Date	Debit	Credit	Balance
Apr. 10	$2,400		$2,400

Computer Equipment Account No. 167
Date	Debit	Credit	Balance
Apr. 1	$20,000		$20,000

Accumulated Depreciation – Computer Equipment Account No. 168
Date	Debit	Credit	Balance

Salaries Payable Account No. 209
Date	Debit	Credit	Balance

J. Nozomi, Capital Account No. 301
Date	Debit	Credit	Balance
Apr. 1		$50,000	$50,000

J. Nozomi, Withdrawals Account No. 302
Date	Debit	Credit	Balance
Apr. 30	$1,500		$1,500

Commissions Earned Account No. 405
Date	Debit	Credit	Balance
Apr. 24		$8,000	$8,000

Depreciation Expense – Computer Equipment Account No. 612
Date	Debit	Credit	Balance

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
Apr. 14	$1,600		$1,600
28	$1,600		$3,200

Insurance Expense Account No. 637
Date	Debit	Credit	Balance

Rent Expense Account No. 640
Date	Debit	Credit	Balance
Apr. 2	$1,800		$1,800

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
Apr. 29	$350		$350

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
Apr. 30	$750		$750

Income Summary Account No. 901
Date	Debit	Credit	Balance

Unadjusted Trial Balance

ADVENTURE TRAVEL Unadjusted Trial Balance April 30, 2017
Cash	$27,000
Accounts Receivable	$0
Office Supplies	$1,000
Prepaid Insurance	$2,400
Computer Equipment	$20,000
Accumulated Depreciation – Computer Equipment		$0
Salaries Payable		$0
J. Nozomi, Capital		$50,000
J. Nozomi, Withdrawals	$1,500
Storage Fees Earned		$8,000
Depreciation Expense – Computer Equipment	$0
Salaries Expense	$3,200
Insurance Expense	$0
Rent Expense	$1,800
Office Supplies Expense	$0
Repairs Expense	$350
Telephone Expense	$750
Income Summary		$0
Total	$58,000	$58,000

Adjusting Entries

Date	Accounts	Debit	Credit
Apr. 30 a.	Insurance Expense	$133
	Prepaid Insurance		$133
Apr. 30 b.	Office Supplies Expense	$400
	Office Supplies		$400
Apr. 30 c.	Depreciation Expense – Computer Equip	$500
	Accumulated Depreciation – Computer Equip.		$500
Apr. 30 d.	Salaries Expense	$420
	Salaries Payable		$420
Apr. 30 e.	Accounts Receivable	$1,750
	Commissions Earned		$1,750

Cash Account No. 101
Date	Debit	Credit	Balance
Apr. 30			$27,000

Accounts Receivable Account No. 106
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 e.	$1,750		$1,750

Office Supplies Account No. 124
Date	Debit	Credit	Balance
Unadj. Bal.			$1,000
Apr. 30 b.		$400	$600

Prepaid Insurance Account No. 128
Date	Debit	Credit	Balance
Unadj. Bal.			$2,400
Apr. 30 a.		$133	$2,267

Computer Equipment Account No. 167
Date	Debit	Credit	Balance
Apr. 30			$20,000

Accumulated Depreciation – Computer Equipment Account No. 168
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 c.		$500	$500

Salaries Payable Account No. 209
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 d.		$420	$420

J. Nozomi, Capital Account No. 301
Date	Debit	Credit	Balance
Apr. 30			$50,000

J. Nozomi, Withdrawals Account No. 302
Date	Debit	Credit	Balance
Apr. 30			$1,500

Commissions Earned Account No. 405
Date	Debit	Credit	Balance
Uadj. Bal.			$8,000
Apr. 30 e.		$1,750	$9,750

Depreciation Expense – Computer Equipment Account No. 612
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 c.	$500		$500

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
Apr. 30			$3,200
Apr. 30 d.	$420		$3,620

Insurance Expense Account No. 637
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 a.	$133		$133

Rent Expense Account No. 640
Date	Debit	Credit	Balance
Apr. 30			$1,800

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance
Unadj. Bal.			$0
Apr. 30 b.	$400		$400

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
Apr. 30			$350

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
Apr. 30			$750

Adjusted Trial Balance

ADVENTURE TRAVEL Adjusted Trial Balance April 30, 2017
Cash	$27,000
Accounts Receivable	$1,750
Office Supplies	$600
Prepaid Insurance	$2,267
Computer Equipment	$20,000
Accumulated Depreciation – Computer Equipment		$500
Salaries Payable		$420
J. Nozomi, Capital		$50,000
J. Nozomi, Withdrawals	$1,500
Commissions Earned		$9,750
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
Income Summary		$0
Total	$60,670	$60,670

Closing Ledgers

J. Nozomi, Capital Account No. 301
Date	Debit	Credit	Balance
Adj. Bal.			$50,000
Clos. 3		$2,197	$52,197
Clos. 4	$1,500		$50,697

J. Nozomi, Withdrawals Account No. 302
Date	Debit	Credit	Balance
Adj. Bal.			$1,500
Clos. 4		$1,500	$0

Commissions Earned Account No. 405
Date	Debit	Credit	Balance
Adj. Bal.			$9,750
Clos. 1	$9,750		$0

Depreciation Expense – Computer Equipment Account No. 612
Date	Debit	Credit	Balance
Adj. Bal.			$500
Clos. 2		$500	$0

Salaries Expense Account No. 622
Date	Debit	Credit	Balance
Adj. Bal.			$3,620
Clos. 2		$3,620	$0

Insurance Expense Account No. 637
Date	Debit	Credit	Balance
Adj. Bal.			$133
Clos. 2		$133	$0

Rent Expense Account No. 640
Date	Debit	Credit	Balance
Adj. Bal.			$1,800
Clos. 2		$1,800	$0

Office Supplies Expense Account No. 650
Date	Debit	Credit	Balance
Adj. Bal.			$400
Clos. 2		$400	$0

Repairs Expense Account No. 684
Date	Debit	Credit	Balance
Adj. Bal.			$350
Clos. 2		$350	$0

Telephone Expense Account No. 688
Date	Debit	Credit	Balance
Adj. Bal.			$750
Clos. 2		$750	$0

Income Summary Account No. 901
Date	Debit	Credit	Balance
July 31			$0
Clos. 1		$9,750	$9,750
Clos. 2	$7,553		$2,197
Clos. 3	$2,197		$0

Post-Closing Trial Balance

ADVENTURE TRAVEL Post-Closing Trial Balance April 30, 2017
Cash	$27,000
Accounts Receivable	$1,750
Office Supplies	$600
Prepaid Insurance	$2,267
Buildings	$20,000
Accumulated Depreciation – Buildings		$500
Salaries Payable		$420
J. Nozomi, Capital		$50,697
Total	$51,617	$51,617

Conclusion

Conclusion:

Adventure Travel’s net income for the month ended April 30, 2017 is $2,197 and total assets, liabilities and owner’s equity is $51,117.