Chapter 4, Problem 2GLP

To determine

Concept introduction:

In accounting, journal entry refers to the posting of transaction into journal items. Such entry
comprises of either debit or credit transaction. The transaction posted in the journal entry can be rechecked because the debit side of the journal must be equivalent to the credit side of the journal.
Adjusted trial balance is prepared after all adjustments and thereafter Income statement, Statement of change in Owner’s equity and balance sheet is prepared.

Requirement 1:

To determine:

We have to determine the balance column format to open the ledger account.

Answer to Problem 2GLP

Solution:

Ledger accounts

101 Cash account
date	debit	credit	Balance
			0

301 Capital account
date	debit	credit	Balance
			0

167 Computer account
date	debit	credit	Balance
			0

688 Telephone expense account
date	debit	credit	Balance
			0

684 Repair expense account
date	debit	credit	Balance
			0

622 Salaries expense account
date	debit	credit	Balance
			0

405 Commission earned account
date	debit	credit	Balance
			0

128 Prepaid insurance account
date	debit	credit	Balance
			0

124Office supplies account
date	debit	credit	Balance
			0

640 Rent expense account
date	debit	credit	Balance
			0

612 depreciation expense-computer equipment
date	debit	credit	Balance
			0

168 accumulated depreciation-computer equipment
date	debit	credit	Balance
			0

106 accounts receivable
date	debit	credit	Balance
			0

901 income summary
date	debit	credit	Balance
			0

Explanation of Solution

Explanation:

All ledger account has been opened with the nil balance in balance column format i.e. first column is for date , second column is for debit and third is for credit column and final column is for balance column.

Requirement 2:

To determine

To determine:

We have to determine the journal entry and post them to the ledger account.

Answer to Problem 2GLP

Solution:

DATE	Journal titles	Debit($)	Credit($)
April 01	Cash	30,000
	Computer equipment	20,000
	j. Nozomi capital		50,000
	(to record investment in cash and equipment)
April 02	Rent expense	1800
	cash		1800
	( to record rent payment)
April 03	Office supplies	1000
	Cash		1000
	( to record purchase of office supplies)
April 10	Prepaid insurance	2400
	cash		2400
	( to record insurance paid)
April 14	cash	8000
	Commission earned		8000
	( to record commission earned)
April 28	Salaries expense	1600
	Cash		1600
	( to record salary expense)
April 29	Repair expense	350
	cash		350
	( to record expense of repair)
April 30	Telephone expense	750
	cash		750
	( to record telephone expense)
April 30	J. Nozomi capital	1500
	cash		1500
	( to record withdrawal of cash for personal use)

Ledger accounts

Cash account
date	debit	credit	Balance
April 01		30,000	30,000
April 02	1800		28,200
April 03	1000		27,200
April 10	2400		24,800
April 14	1600		23,200
April 24		8000	31,200
April 28	1600		29,600
April 29	350		29,250
April 30	750		28,500
April 30	1500		27,000

Capital account
Date	debit	credit	Balance
April 1		50,000	50,000

Computer account
date	debit	credit	Balance
April 1	20,000		20,000

Telephone expense account
date	debit	credit	Balance
April 30	750		750

Repair expense account
date	debit	credit	Balance
April 29	350		350

Salaries expense account
date	debit	credit	Balance
April 14	1600		1600
April 28	1600		3200

Commission earned account
date	debit	credit	Balance
April 24		8000	8000

Prepaid insurance account
date	debit	credit	Balance
April 10	2400		2400

Office supplies account
date	debit	credit	Balance
April 3	1000		1000

Rent expense account
date	debit	credit	Balance
April 2	1800		1800

Explanation of Solution

Explanation:

1. In the given case, cash account and computer equipment account will be debited and capital account will be credited.
2. In the given case, rent expense account will be debited and cash account will be credited.
3. When office supplies is purchased then office supplies account will be debited and cash account will be credited.
4. In this case, prepaid insurance account will be debited and cash account will be credited.
5. In this case, salaries expense account will be debited and cash account will be credited.
6. When commission is earned then cash account will be debited and commission account will be credited.
7. When repair and telephone expense is incurred then repair account and telephone expense account will be debited and cash account will be credited.
8. Hen cash is withdrew then withdrawal account will be debited and cash account will be credited.

Requirement 3:

To determine

To determine:

We have to determine the unadjusted trial balance.

Answer to Problem 2GLP

Solution:

J. Nozomi Travel Unadjusted trial balance April 30, 2013
Account title	Debit($)	Credit($)
101: cash	27000
106: accounts receivable	0
124: office supplies	1,000
128: prepaid insurance	2,400
167: computer equipment	20,000
168: accumulated depreciation- computer equipment		0
209: salaries payable		0
301: j. nozomi capital		50,000
302: J. nozomi withdrawals	1,500
405: commission earned		8,000
612: depreciation expense-computer equipment	0
622: salaries expense	3,200
637:insurance expense	0
640: rent expense	1,800
650:office supplies expense	0
684: repair expense	350
688: telephone expense	750
Total	$58,000	$ 58,000

Explanation of Solution

Explanation:

Cash account
date	debit	credit	Balance
April 01		30,000	30,000
April 02	1800		28,200
April 03	1000		27,200
April 10	2400		24,800
April 14	1600		23,200
April 24		8000	31,200
April 28	1600		29,600
April 29	350		29,250
April 30	750		28,500
April 30	1500		27,000

Capital account
Date	debit	credit	Balance
April 1		50,000	50,000

Computer account
date	debit	credit	Balance
April 1	20,000		20,000

Telephone expense account
date	debit	credit	Balance
April 30	750		750

Repair expense account
date	debit	credit	Balance
April 29	350		350

Salaries expense account
date	debit	credit	Balance
April 14	1600		1600
April 28	1600		3200

Commission earned account
date	debit	credit	Balance
April 24		8000	8000

Prepaid insurance account
date	debit	credit	Balance
April 10	2400		2400

Requirement 4:

To determine

To determine:

We have to determine the adjusting entries for the given transaction.

Answer to Problem 2GLP

Solution:

DATE	Journal titles	Debit($)	Credit($)
a.	Insurance expense	133
	Prepaid insurance		133
	( to record prepaid insurance)
b.	Office supplies expense	400
	Office supplies		400
	( to record office supply still available)
c.	Depreciation expense-computer equipment	500
	Accumulated depreciation- computer equipment		500
	( to record depreciation)
d.	Salaries expense	420
	Salaries payable		420
	( to record unrecorded salary)
e.	Accounts receivable	1,750
	Commission earned		1,750
	( to record commission earned)

Explanation of Solution

Explanation:

1. In the given case, insurance expense account will be debited and prepaid insurance account will be credited.
2. In this case, office supplies expenses account will be debited and office supplies will be credited.
3. When depreciation is to be provided then depreciation expense account will be debited and accumulated depreciation account will be credited.
4. In this case, salaries expense account will be debited and salaries payable account will be credited.
5. In the given case, accounts receivable account will be debited and commission earned account will be credited.

Requirement 5:

To determine

To determine:

We have to determine the adjusted trial balance, income statement and balance sheet.

Answer to Problem 2GLP

Solution:

J. Nozomi Travel Adjusted trial balance April 30, 2013
Account title	Debit($)	Credit($)
101: cash	27000
106: accounts receivable	1750
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: commission earned		9750
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: repair expense	350
688: telephone expense	750
Total	$60,670	$ 60,670

J. Nozomi Travel Income statement For month ended April 30, 2013
Account title	amount($)	amount($)
Revenues:
Commission earned		9750
Expenses:
Depreciation expense- computer equipment	500
Salaries expense	3620
Insurance expense	133
Rent expense	1,800
Office supplies expense	400
Telephone expenses	750
Repair expense	350
Total expenses		7553
Net income		$2,197

J. Nozomi Travel Balance sheet April 30, 2013
	amount($)	amount($)
Assets:
Cash		27,000
Accounts receivable		1,750
Office supplies		600
Prepaid insurance		2,267
Computer equipment	20,000
Accumulated depreciation	500	19,500
Total assets		51,117
Liabilities
Salaries payable		420
Equity
J. Nozomi capital		50,697
Total liabilities and equity		$51,117

Explanation of Solution

Explanation:

Cash account
Date	Debit	Credit	Balance
April 1	30,000		30,000
April 2		1800	28,200
April 3		1000	27,200
April 10		2,400	24,800
April 14		1600	23,200
April 24	8,000		31,200
April 28		1600	29,600
April 29		350	29,250
April 30		750	28,500
April 30		1500	27,000

Capital account
Date	Debit	Credit	Balance
April 1		50,000	50,000

Computer account
Date	Debit	Credit	Balance
April 1	20,000		20,000

Telephone expense account
Date	Debit	Credit	Balance
April 30	750		750

Repair expense account
Date	debit	Credit	Balance
April 29	350		350

Salaries expense account
Date	debit	Credit	Balance
April 14	1600		1600
April 28	1600		3200
April 30	420		3620

Commission earned account
Date	debit	Credit	Balance
April 24		8000	8000
April 30		1750	9750

insurance account
Date	debit	credit	balance
April 30	133		133

Office supplies account
Date	debit	credit	balance
April 30	400		400

Rent expense account
Date	debit	credit	balance
April 2	1800		1800

Requirement 6:

To determine

To determine:

We have to determine the journal entries to close the temporary accounts.

Explanation of Solution

Explanation:

DATE	Journal titles	Debit($)	Credit($)
April 30	Commission earned	9750
	Income summary		9750
	( to record closing entry)
April 30	Income summary	7,553
	Depreciation expense		500
	Salaries expense		3620
	Insurance expense		133
	Rent expense		1,800
	Office supplies expense		400
	Repair expense		350
	Telephone expense		750
	( to record closing expenses)
April 30	Income summary	2,197
	j. nozomi capital		2,197
	( to record closing capital)
April 30	j. nozomi capital	1500
	j.nozomi withdrawals		1500
	( to record closing withdrawal)

Ledger accounts

Cash account
Date	Debit	credit	Balance
April 1	30,000		30,000
April 2		1800	28,200
April 3		1000	27,200
April 10		2,400	24,800
April 14		1600	23,200
April 24	8,000		31,200
April 28		1600	29,600
April 29		350	29,250
April 30		750	28,500
April 30		1500	27,000

Capital account
Date	Debit	credit	Balance
April 1		50,000	50,000
April 30		2197	52197
April 30	1500		50,697

Computer account
Date	Debit	credit	Balance
April 1	20,000		20,000

Telephone expense account
Date	Debit	credit	Balance
April 30	750		750
April 30		750	0

Repair expense account
Date	debit	credit	Balance
April 29	350		350
April 30		350	0

Salaries expense account
Date	debit	credit	Balance
April 14	1600		1600
April 28	1600		3200
April 30	420		3620
April 30		3620	0

Commission earned account
Date	debit	credit	Balance
April 24		8000	8000
April 30		1750	9750
April 30	9750		0

insurance account
Date	debit	credit	balance
April 30	133		133
April 30		133	0

Office supplies account
Date	debit	credit	balance
April 30	400		400
April 30		400	0

Rent expense account
Date	debit	credit	balance
April 2	1800
April 30		1800	0

Income summary account
Date	debit	credit	balance
April 30		9750	9750
April 30	7,553		2197
April 30	2197		0

Requirement 7:

To determine

To determine:

We have to determine the post closing trial balance.

Answer to Problem 2GLP

Solution:

J. Nozomi Travel Post closing trial balance April 30, 2013
Account title	Debit($)	Credit($)
101: cash	27000
106: accounts receivable	1750
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		50,697
Total	$51617	$ 51,617

Explanation of Solution

Explanation:

Cash account
Date	Debit	credit	Balance
April 1	30,000		30,000
April 2		1800	28,200
April 3		1000	27,200
April 10		2,400	24,800
April 14		1600	23,200
April 24	8,000		31,200
April 28		1600	29,600
April 29		350	29,250
April 30		750	28,500
April 30		1500	27,000

Capital account
Date	Debit	credit	Balance
April 1		50,000	50,000
April 30		2197	52197
April 30	1500		50,697

Computer account
Date	Debit	credit	Balance
April 1	20,000		20,000