Question 1Entry

1

2 Thompson paid rent for the month of September in cash ($1,485)3 Merchandise inventory was bought for $137,500 in credit4 Furniture and fixtures were bought for $15,500 in cash5 Thompson availed of advertising services and paid $1,320 in cash6 PC Depot's employees' wages were paid totaling $9357 Office supplies bought for $1,100 cash8 Utilities were paid for in cash ($275)

Thompson invested a total of $165,000 as a business owner ($65,000 own funds, $100,000 via bank loan)

Question 2

Cash Bank loan payable(1) 165,000 (2) 1,485 (1) 100,000

(4) 15,500 100,000(5) 1,320(6) 935 Proprietor's Capital(7) 1,100 (1) 65,000(8) 275 65,000

165,000 20,615144,385 Accounts Payable

(3) 137,500137,500

Rent Expense(2) 1,485

1,485

Merchandise Inventory(3) 137,500

137,500

Furnitures and Fixtures(4) 15,500

15,500

Advertising Expense(5) 1,320

1,320

Wages Expense(6) 935

935

Office Supplies Expense(7) 1,100

1,100

Utilities Expense(8) 275

75

Rent Expense(2) 1,485

1,485

Question 3

Journal Entries T accounts#9DR Cash 38,000

CR Sales Revenue 38,000 Cash(1) 165,000 (2) 1,485

#10 (9) 38,000 (4) 15,500DR Accounts Receivable 14,850 (11) 3,614 (5) 1,320

CR Sales Revenue 14,850 (12) 96,195 (6) 935(7) 1,100

#11 (8) 275DR Cash 3,614 (15) 688

CR Accounts Receivable 3,614 (17) 1,485(18) 2,310

#12 (20) 660DR Accounts paybale 96,195 277,051

CR Cash 96,195Rent Expense

#13 (2) 1,485DR Merchandise Inventory 49,940 1,485

CR Accounts Payable 49,940Merchandise Inventory

#14 (3) 137,500 (14) 38,140DR Cost of Sales 38,140 (13) 49,940

CR Merchandise Inventory 38,140 149,300

#15 Furnitures and FixturesDR Wage Expense 688 (4) 15,500

CR Cash 688 (20) 1,76017,260

#16DR Wage Expense 440 Advertising Expense

CR Accrued Wages 440 (5) 1,3201,320

#17DR Prepaid Rent 1,485 Wages Expense

CR Cash 1,485 (6) 935(15) 688

#18 (16) 440DR Prepaid Insurance 2310 2063

CR Cash 2310

#19 Office Supplies ExpenseDR Utilities Expense 226 (7) 1,100

CR Accounts Payable 226 1,100

#20 Utilities ExpenseDR Furnitures and Fixtures 1,760 (8) 275

CR Cash 660 (19) 226CR Accounts Payable 1,100 501

Accounts Receivable(10) 14,850 (11) 3,614

11236

Cost of Sales(14) 38,140

38140

Prepaid Rent(17) 1,485

1485

Prepaid Insurance(18) 2,310

2310

Bank loan payable(1) 100,000

100,000

Proprietor's Capital(1) 65,000

65,000

Accounts Payable(12) 96,195 (3) 137,500

(13) 49,940(19) 226(20) 1100

92571

Sales Revenue(9) 38,000(10) 14,850

52850

Accrued Wages(16) 440

440

Question 4Adjusting Entries > CalculationJournal Entry Depreciation#21 17,260DR Depreciation Expense 144 10 years useful life

CR Accumulated Depreciation 1441726

#22DR Interest Expense 1250 1726

CR Interest Payable 1250 12

143.833333333333#23DR Insurance Expense 193 Interest

CR Prepaid Insurance 193 100,00015%

15000

1250

InsuranceWhy are these adjusting entries required? 2310Adjusting entries are needed at the end of this period to allocate revenue and expense items to the period they are actually applicable. Required because normal journal entries are based on actual transactions 192.5and the date these transactions occured may not be the date requiredto fulfill the matching principal of accrual accounting **values rounded up> Made at the end of accounting period to adjust/appropriate expenses and revenues tothe accounting period where they actually occurred(these are adjustments based on REALITY and not on source document)>principle of assigning revenues to the period in which they are earnedand expenses to the periods in which goods or services are used

T accounts

Furnitures and fixtures Cash Bank loan payable

(1) 165,000 (2) 1,485 (1) 100,000deprecation per year (9) 38,000 (4) 15,500 100,000

(11) 3,614 (5) 1,320(12) 96,195 (6) 935 Proprietor's Capital

(7) 1,100 (1) 65,000(8) 275 65,000

depreciation per month (15) 688(17) 1,485 Accounts Payable(18) 2,310 (12) 96,195 (3) 137,500

Note payable (20) 660 (13) 49,940Interest 277,051 (19) 226Interest for the year (20) 1100

Rent Expense 92571Interest for the month (2) 1,485

1,485 Sales Revenue(9) 38,000

Insurance for 1 year Merchandise Inventory (10) 14,850Adjusting entries are needed at the end of this period to allocate revenue and expense items to the period they are actually applicable. (3) 137,500 (14) 38,140 52850

Insurance for 1 month (13) 49,940149,300 Accrued Wages

(16) 440Furnitures and Fixtures 440(4) 15,500(20) 1,760 Depreciation Expense

17,260 (21) 144144

Advertising Expense(5) 1,320 Accumulated Depreciation

1,320 (21) 144144

Wages Expense(6) 935 Interest Expense(15) 688 (22) 1,250(16) 440 1,250

2063Interest Payable

(22) 1,250Office Supplies Expense 1,250

(7) 1,1001,100 Insurance Expense

(23) 193Utilities Expense 193

(8) 275

(19) 226501

Accounts Receivable(10) 14,850 (11) 3,614

11236

Cost of Sales(14) 38,140

38140

Prepaid Rent(17) 1,485

1485

Prepaid Insurance(18) 2,310 (23) 193

2117

Question 5 T accountsClosing Entries

#24 CashDR Sales Revenue 52,850 (1) 165,000

CR Income Summary 52,850 (9) 38,000(11) 3,614

#25 (12) 96,195DR Income Summary 46,196

CR Expenses** 46,196**Total expenses

#26DR Income Summary 6,654

CR Retained Earnings 6,654 277,051

Rent Expense(2) 1,485

0

Merchandise Inventory(3) 137,500(13) 49,940

149,300

Furnitures and Fixtures(4) 15,500(20) 1,760

17,260

Advertising Expense(5) 1,320

0

Wages Expense(6) 935(15) 688(16) 440

0

Office Supplies Expense(7) 1,100

0

Utilities Expense(8) 275(19) 226

0

Accounts Receivable(10) 14,850

11,236

Cost of Sales(14) 38,140

0

Prepaid Rent(17) 1,485

1,485

Prepaid Insurance(18) 2,310

2,117

Cash Bank loan payable(2) 1,485 (1) 100,000(4) 15,500 100,000(5) 1,320(6) 935 Proprietor's Capital(7) 1,100 (1) 65,000(8) 275 65,000(15) 688(17) 1,485 Accounts Payable(18) 2,310 (12) 96,195 (3) 137,500(20) 660 (13) 49,940

(19) 226(20) 1100

Rent Expense 92,571 (25) 1,485

Sales Revenue(9) 38,000

Merchandise Inventory (10) 14,850(14) 38,140 52,850

Accrued Wages(16) 440

Furnitures and Fixtures 440

Depreciation Expense(21) 144 (25) 144

0Advertising Expense

(25) 1,320 Accumulated Depreciation(21) 144

144Wages Expense

(25) 2,063 Interest Expense(22) 1,250 (25) 1,250

0

Interest Payable(22) 1,250

Office Supplies Expense 1,250(25) 1,100

Insurance Expense(23) 193 (25) 193

Utilities Expense 0(25) 501

Income Summary (25) 46,196** (24) 52,850

6,654 Accounts Receivable

(11) 3,614 **total expenses

Cost of Sales(25) 38,140

Prepaid Rent

Prepaid Insurance(23) 193

PC DepotIncome Statement

For the Month Ended September 30, 20XX

Net Sales $52,850Cost of Sales 38,140

Gross Margin 14,710 Expenses

Rent 1,485 Advertising 1,320 Wages 2,063 Depreciation 144 Supplies 1,100 Utilities 501 Insurance 193 Total Operating Expenses 6,806

Other non-operating expenseInterest 1,250

Net Income $6,654

** No provision for income tax / Tax expense excluded in exercise

PC DepotBalance Sheet

As of September 30, 20XX

AssetsCash $84,661Accounts Receivable 11,236 Merchandise Inventory 149,300 Prepaid Insurance 2,117 Prepaid Rent 1,485 Furnitures and Fixtures $17,260

Accumulated Depreciation -144 17,116 Total Assets $265,915

Liabilities and Owners' EquityLiabilitiesAccounts Payable $ 92,571 Wages Payable/Accrued Wages 440 Bank loan payable 100,000 Interest Payable 1,250 Total Liabilities 194,261 Owners' EquityProprietor's Capital 65,000 Retained Earnings 6,654 Total Owners' Equity 71,654

Total Liabilities and Owners' Equity $ 265,915

Profit Margin 13%

Question 2

Cash Bank loan payable(1) 165,000 (2) 1,485 (1) 100,000

(4) 15,500 100,000(5) 1,320(6) 935 Proprietor's Capital(7) 1,100 (1) 65,000(8) 275 65,000

165,000 20,615144,385 Accounts Payable

(3) 137,500137,500

Rent Expense(2) 1,485

1,485

Merchandise Inventory(3) 137,500

137,500

Furnitures and Fixtures(4) 15,500

15,500

Advertising Expense(5) 1,320

1,320

Wages Expense(6) 935

935

Office Supplies Expense(7) 1,100

1,100

Utilities Expense(8) 275

75

Rent Expense(2) 1,485

1,485

Question 3Journal Entries

Entries DR CR#9

Cash 38,000Sales Revenue 38,000

#10Accounts Receivable 14,850

Sales Revenue 14,850

#11Cash 3,614

Accounts Receivable 3,614

#12Accounts paybale 96,195

Cash 96,195

#13Merchandise Inventory 49,940

Accounts Payable 49,940

#14Cost of Sales 38,140

Merchandise Inventory 38,140

#15Wage Expense 688

Cash 688

#16Wage Expense 440

Accrued Wages 440

#17Prepaid Rent 1,485

Cash 1,485

#18Prepaid Insurance 2310

Cash 2310

#19Utilities Expense 226

Accounts Payable 226

#20Furnitures and Fixtures 1,760

Cash 660Accounts Payable 1,100

Cash Bank loan payable(1) 165,000 (2) 1,485 (1) 100,000(9) 38,000 (4) 15,500 100,000(11) 3,614 (5) 1,320(12) 96,195 (6) 935 Proprietor's Capital

(7) 1,100 (1) 65,000(8) 275 65,000(15) 688(17) 1,485 Accounts Payable(18) 2,310 (12) 96,195 (3) 137,500(20) 660 (13) 49,940

277,051 (19) 226(20) 1100

Rent Expense 92571(2) 1,485

1,485 Sales Revenue(9) 38,000

Merchandise Inventory (10) 14,850(3) 137,500 (14) 38,140 52850(13) 49,940

149,300 Accrued Wages(16) 440

Furnitures and Fixtures 440(4) 15,500(20) 1,760 Cost of Sales

17,260 (14) 38,14038140

Advertising Expense(5) 1,320 Prepaid Rent

1,320 (17) 1,4851485

Wages Expense(6) 935 Prepaid Insurance(15) 688 (18) 2,310(16) 440 2310

2063

Office Supplies Expense(7) 1,100

1,100

Utilities Expense(8) 275(19) 226

501

Accounts Receivable

(10) 14,850 (11) 3,61411236

Question 4Adjusting Entries

Entries DR CR#21

Depreciation Expense 144 17260 / 10 /12Accumulated Depreciation 144 143.83333

#22Interest Expense 1250 100,000*.15/12

Interest Payable 1250 1250

#23Insurance Expense 193 2310/12

Prepaid Insurance 193 192.5

Cash Bank loan payable Prepaid Rent(1) 165,000 (2) 1,485 (1) 100,000 (17) 1,485(9) 38,000 (4) 15,500 100,000 1485(11) 3,614 (5) 1,320

(12) 96,195 (6) 935 Proprietor's Capital Prepaid Insurance(7) 1,100 (1) 65,000 (18) 2,310 (23) 193(8) 275 65,000 2117(15) 688(17) 1,485 Accounts Payable(18) 2,310 (12) 96,195 (3) 137,500(20) 660 (13) 49,940

277,051 (19) 226(20) 1100

Rent Expense 92571(2) 1,485

1,485 Sales Revenue(9) 38,000

Merchandise Inventory (10) 14,850(3) 137,500 (14) 38,140 52850(13) 49,940

149,300 Accrued Wages(16) 440

Furnitures and Fixtures 440(4) 15,500(20) 1,760 Depreciation Expense

17,260 (21) 144144

Advertising Expense(5) 1,320 Accumulated Depreciation

1,320 (21) 144144

Wages Expense(6) 935 Interest Expense(15) 688 (22) 1,250(16) 440 1,250

2063Interest Payable

Office Supplies Expense (22) 1,250(7) 1,100 1,250

1,100Insurance Expense

Utilities Expense (23) 193(8) 275 193(19) 226

501 Cost of Sales(14) 38,140

Accounts Receivable 38140(10) 14,850 (11) 3,614

11236

Question 5Closing Entries

Entries DR CR#24 Bank loan payable

Sales Revenue 52,850 (1) 100,000Income Summary 52,850 100,000

#25 Proprietor's CapitalIncome Summary 46,196 (1) 65,000

Expenses 46,196 65,000

#26 Accounts PayableIncome Summary 6,654 (12) 96,195 (3) 137,500

Retained Earnings 6,654 (13) 49,940(19) 226

Cash Wages Expense (20) 1100(1) 165,000 (2) 1,485 (6) 935 (25) 2,063 92,571 (9) 38,000 (4) 15,500 (15) 688(11) 3,614 (5) 1,320 (16) 440 Sales Revenue(12) 96,195 (6) 935 0 (9) 38,000

(7) 1,100 (10) 14,850(8) 275 Office Supplies Expense 52,850 (15) 688 (7) 1,100 (25) 1,100(17) 1,485 0 Accrued Wages(18) 2,310 (16) 440(20) 660 Utilities Expense 440

277,051 (8) 275 (25) 501(19) 226 Depreciation Expense

Rent Expense 0 (21) 144 (25) 144(2) 1,485 (25) 1,485 0

0 Accounts Receivable(10) 14,850 (11) 3,614 Accumulated Depreciation

Merchandise Inventory 11,236 (21) 144(3) 137,500 (14) 38,140 144(13) 49,940 Cost of Sales

149,300 (14) 38,140 (25) 38,140 Interest Expense0 (22) 1,250 (25) 1,250

Furnitures and Fixtures 0(4) 15,500 Prepaid Rent(20) 1,760 (17) 1,485 Interest Payable

17,260 1,485 (22) 1,2501,250

Advertising Expense Prepaid Insurance(5) 1,320 (25) 1,320 (18) 2,310 (23) 193 Insurance Expense

0 2,117 (23) 193 (25) 1930

Income Summary (25) 46,196 (24) 52,850

6,654

PC DepotIncome Statement

For the Month Ended September 30, 20XX

Net Sales $52,850Cost of Sales 38,140

Gross Margin 14,710 Expenses

Rent 1,485 Advertising 1,320 Wages 2,063 Depreciation 144 Supplies 1,100 Utilities 501 Insurance 193 Total Operating Expenses 6,806

Other non-operating expenseInterest 1,250

Net Income $6,654

PC DepotBalance Sheet

As of September 30, 20XX

AssetsCash $84,661Accounts Receivable 11,236 Merchandise Inventory 149,300 Prepaid Insurance 2,117 Prepaid Rent 1,485 Furnitures and Fixtures $17,260

Accumulated Depreciation -144 17,116 Total Assets $265,915

Liabilities and Owners' EquityLiabilitiesAccounts Payable $ 92,571 Wages Payable/Accrued Wages 440 Bank loan payable 100,000 Interest Payable 1,250 Total Liabilities 194,261 Owners' EquityProprietor's Capital 65,000 Retained Earnings 6,654 Total Owners' Equity 71,654

Total Liabilities and Owners' Equity $ 265,915