Accounting Homework for Chapter 4 Problem 4-2A

Homework for Chapter 4 – Problem 4-2A On April 1, 2011, Jennifer Stafford created a new travel agency, See-It-Now Travel. The following transactions occurred during the company’s first month. April 1 Stafford invested $20,000 cash and computer equipment worth $40,000 in the company. 2 The company rented furnished office space by paying $1,700 cash for the first month’s (April) rent. 3 The company purchased $1,100 of office supplies for cash. 10 The company paid $3,600 cash for the premium on a 12-month insurance policy. Coverage begins on April 11. 14 The company paid $1,800 cash for two weeks’ salaries earned by employees. 24 The company collected $7,900 cash on commissions from airlines on tickets obtained for customers. 28 The company paid $1,800 cash for two weeks’ salaries earned by employees. 29 The company paid $250 cash for minor repairs to the company’s computer. 30 The company paid $650 cash for this month’s telephone bill. 30 Stafford withdrew $1,500 cash from the company for personal use. Required: 1. Use the balance column format to set up each ledger account listed in its chart of accounts. Balance Column Account Ledger CASH Date 01-04-2011 02-04-2011 03-04-2011 10-04-2011 14-04-2011 24-04-2011 28-04-2011 29-04-2011 30-04-2011 30-04-2011 Description Cash Rent expense Office supplies Prepaid insurance Salaries expense Commission earned Salaries expense Repairs expense Telephone expense Withdrawals PR 101 640 124 128 622 405 622 684 688 302 ACCOUNT No. 101 Debit $ Credit $ 20,000 1,700 1,100 3,600 1,800 7,900 1,800 250 650 1,500 Balance $ 20,000 18,300 17,200 13,600 11,800 19,700 17,900 17,650 17,000 15,500 Accounts Receivable Date Description 30-04-2011 Commission earned PR 405 ACCOUNT No. 106 Debit $ Credit $ 1,650 Balance $ 1,650 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. Date April 1 April 2 April 3 April 10 April 14 General Journal Description Cash Computer Equipment J. Stafford, Capital Owner invested in the business. Rent Expense Cash Paid one month’s rent. Office Supplies Cash Acquired office supplies. Prepaid Insurance Cash Paid 12-months premium in advance. Salaries Expense Cash Paid two weeks’ salaries PR 101 167 301 Debit 20,000 40,000 640 101 1,700 124 101 1,100 128 101 3,600 622 101 1,800 Credit 60,000 1,700 1,100 3,600 1,800 April 24 April 28 April 29 April 30 April 30 Cash Commissions Earned Collected commissions from airlines. Salaries Expense Cash Paid two weeks’ salaries. Repairs Expense Cash Repaired the computer. Telephone Expense Cash Paid the telephone bill. J. Stafford, Withdrawals Cash Owner withdrew cash for personal use. 101 405 7,900 622 101 1,800 684 101 250 688 101 650 302 101 1,500 7,900 1,800 250 650 1,500 3. Prepare an unadjusted trial balance as of April 30. No. 101 106 124 128 167 168 209 301 302 405 612 622 637 640 650 684 688 SEE – IT – NOW TRAVEL Unadjusted Trial Balance April 30, 2011 Account Title Cash $ Accounts receivable Office supplies Prepaid insurance Computer equipment Accumulated depreciation – Computer equipment Salaries payable J. Stafford, Capital J. Stafford, Withdrawals Commissions earned Depreciation expense – Computer equipment Salaries expense Insurance expense Rent expense Office supplies expense Repairs expense Telephone expense Totals $ Debit 15,500 0 1,100 3,600 40,000 Credit $ 0 0 60,000 1,500 7,900 0 3,600 0 1,700 0 250 650 67,900 $ 67,900 4. Use the following information to journalize and post adjusting entries for the month: A. Two-thirds of one month’s insurance coverage has expired. B. At the end of the month, $700 of office supplies are still available. C. This month’s depreciation on the computer equipment is $600. D. Employees earned $320 of unpaid and unrecorded salaries as of month-end. E. The company earned $1,650 of commissions that are not yet billed at month-end. Adjusting Entries Letters Date Account Title PR Debit A April 30 Insurance Expense 637 200 Prepaid Insurance 128 To record expired insurance (2/3 x $300 per month) B April 30 Office Supplies Expense 650 400 Office Supplies 124 To record cost of supplies used ($1,100 – $700) C April 30 Depreciation Expense – Computer Equipment 612 600 Accumulated Depreciation – Computer 168 Equipment To record depreciation D April 30 Salaries Expense 622 320 Salaries Payable 209 To record accrued salaries E April 30 Accounts Receivable 106 1,650 Commissions Earned 405 To record accrued commissions Credit 200 400 600 320 1,650 5. Prepare the income statement and the statement of owner’s equity for the month of April and the balance sheet at April 30, 2011. SEE – IT – NOW TRAVEL Income Statement For Month Ended April 30, 2011 Debit Credit Commissions earned $ 9,550 Expenses Depreciation expense – Computer Equipment 600 Salaries expense 3,920 Insurance expense 200 Rent expense 1,700 Office supplies expense 400 Repairs expense 250 Telephone expense 650 Total Expenses 7,720 Net Income $ 1,830 SEE – IT – NOW TRAVEL Statement of Owner’s Equity For Month Ended April 30, 2011 Debit J. Stafford, Capital , April 1, 2011 Plus: Investment by owner Net income Credit $0 60,000 1,830 61,830 (1,500) $60,330 Less: Owner Withdrawals J. Stafford, Capital, April 30, 2011 SEE – IT – NOW TRAVEL Balance Sheet April 30, 2011 Debit Credit Assets Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Less: Accumulated Depreciation- Computer Equipment Total Assets Liabilities Salaries Payable Equity J. Stafford, Capital Total Liabilities and Equity $ 15,500 1,650 700 3,400 $ 40,000 (600) 39,400 $60,650 $ 320 60,330 $60,650 6. Prepare journal entries to close the temporary accounts and post these entries to the ledger. Closing Entries Date Account Titles PR Debit Credit April 30 Commission Earned 405 9,550 Income Summary 901 9,550 To close the revenue account. April 30 Income Summary 901 7,720 Depreciation Expense – Computer Equipment 612 600 Salaries Expense 622 3,920 Insurance Expense 637 200 Rent Expense 640 1,700 Office Supplies Expense 650 400 April 30 April 30 Date April 1 2 3 10 14 24 28 29 30 30 Repairs Expense Telephone Expense To close the expense accounts. Income Summary J. Stafford, Capital To close the Income Summary account. J. Stafford, Capital J. Stafford, Withdrawals To close the withdrawals account. Ledger as of April 30 Cash Explanation PR Debit 20,000 7,900 Accounts Receivable Explanation PR Debit Adjusting 1,650 Office Supplies Date Explanation PR Debit April 3 1,100 30 Adjusting Prepaid Insurance Date Explanation PR Debit April 10 3,600 30 Adjusting Computer Equipment Date Explanation PR Debit April 1 40,000 Accumulated Depreciation – Computer Equipment Date Explanation PR Debit April 30 Adjusting Salaries Payable Date Explanation PR Debit April 30 Adjusting J. Stafford, Capital Date April 30 684 688 250 650 901 301 1,830 301 302 1,500 1,830 1,500 Acct. No. 101 Credit Balance 20,000 1,700 18,300 1,100 17,200 3,600 13,600 1,800 11,800 19,700 1,800 17,900 250 17,650 650 17,000 1,500 15,500 Acct. No. 106 Credit Balance 1,650 Acct. No. 124 Credit Balance 1,100 400 700 Acct. No. 128 Credit Balance 3,600 200 3,400 Acct. No. 167 Credit Balance 40,000 Acct. No. 168 Credit Balance 600 600 Acct. No. 209 Credit Balance 320 320 Acct. No. 301 Date April 1 30 30 Date April 30 30 Explanation PR Closing Closing Debit Credit 60,000 1,830 1,500 J. Stafford, Withdrawals Explanation PR Debit 1,500 Closing Credit 1,500 Commissions Earned Explanation PR Date Debit April 24 30 Adjusting 30 Closing 9,550 Depreciation Expense – Computer Equipment Date Explanation PR Debit April 30 Adjusting 600 30 Closing Salaries Expense Date Explanation PR Debit April 14 1,800 28 1,800 30 Adjusting 320 30 Closing Insurance Expense Date Explanation PR Debit April 30 Adjusting 200 30 Closing Rent Expense Date Explanation PR Debit April 2 1,700 30 Closing Office Supplies Date Explanation PR Debit April 30 Adjusting 400 30 Closing Repairs Expense Date Explanation PR Debit April 29 250 30 Closing Telephone Expense Date Explanation PR Debit April 30 650 30 Closing Income Summary Date Explanation PR Debit Credit 7,900 1,650 Credit 600 Credit 3,920 Credit 200 Credit 1,700 Credit 400 Credit 250 Credit 650 Credit Balance 60,000 61,830 60,330 Acct. No. 302 Balance 1,500 0 Acct. No. 405 Balance 7,900 9,550 0 Acct. No. 612 Balance 600 0 Acct. No. 622 Balance 1,800 3,600 3,920 0 Acct. No. 637 Balance 200 0 Acct. No. 640 Balance 1,700 0 Acct. No. 650 Balance 400 0 Acct. No. 684 Balance 250 0 Acct. No. 688 Balance 650 0 Acct. No. 901 Balance April 30 Closing 30 Closing 30 Closing 7. Prepare a post-closing trial balance. 9,550 7,720 1,830 9,550 1,830 0 SEE – IT – NOW TRAVEL Post – Closing Trial Balance April 30, 2011 Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accumulated Depreciation – Computer Equipment Salaries Payable J. Stafford , Capital Totals Debit $ 15,500 1,650 700 3,400 40,000 $ 61,250 Credit $ 600 320 60,330 $ 61,250