Download - Case 4 1
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