Question 1

Entry
1
Thompson invested a total of $165,000 as a business owner ($65,000 own funds,
$100,000 via bank loan)
2 Thompson paid rent for the month of September in cash ($1,485)
3 Merchandise inventory was bought for $137,500 in credit
4 Furniture and fixtures were bought for $15,500 in cash
5 Thompson availed of advertising services and paid $1,320 in cash
6 PC Depot's employees' wages were paid totaling $935
7 Office supplies bought for $1,100 cash
8 Utilities were paid for in cash ($275)
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 20,615
144,385 Accounts Payable
(3) 137,500
137,500
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
Question 3

Journal Entries T accounts

#9
DR Cash 38,000
CR Sales Revenue 38,000 Cash
(1) 165,000 (2) 1,485
#10 (9) 38,000 (4) 15,500
DR 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) 275
DR Cash 3,614 (15) 688
CR Accounts Receivable 3,614 (17) 1,485
(18) 2,310
#12 (20) 660
DR Accounts paybale 96,195 277,051
CR Cash 96,195
Rent Expense
#13 (2) 1,485
DR Merchandise Inventory 49,940 1,485
CR Accounts Payable 49,940
Merchandise Inventory
#14 (3) 137,500 (14) 38,140
DR Cost of Sales 38,140 (13) 49,940
CR Merchandise Inventory 38,140 149,300

#15 Furnitures and Fixtures

DR Wage Expense 688 (4) 15,500
CR Cash 688 (20) 1,760
17,260
#16
DR Wage Expense 440 Advertising Expense
CR Accrued Wages 440 (5) 1,320
1,320
#17
DR Prepaid Rent 1,485 Wages Expense
CR Cash 1,485 (6) 935
(15) 688
#18 (16) 440
DR Prepaid Insurance 2310 2063
CR Cash 2310

#19 Office Supplies Expense

DR Utilities Expense 226 (7) 1,100
 CR Accounts Payable 226 1,100

#20 Utilities Expense

DR Furnitures and Fixtures 1,760 (8) 275
CR Cash 660 (19) 226
CR 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 4
Adjusting Entries > Calculation
Journal Entry Depreciation
#21 17,260
DR Depreciation Expense 144 10 years useful life
CR Accumulated Depreciation 144
1726
#22
DR Interest Expense 1250 1726
CR Interest Payable 1250 12

143.833333333333
#23
DR Insurance Expense 193 Interest
CR Prepaid Insurance 193 100,000
15%
15000

1250

Insurance
Why are these adjusting entries required? 2310
Adjusting entries are needed at the end of this period to allocate revenue and expense items to the period they are actually ap
Required because normal journal entries are based on actual transactions 192.5
and the date these transactions occured may not be the date required
to fulfill the matching principal of accrual accounting **values rounded up
> Made at the end of accounting period to adjust/appropriate expenses and revenues to
the 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 earned
and 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) 100,000
deprecation 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) 49,940
Interest 277,051 (19) 226
Interest for the year (20) 1100
Rent Expense 92571
Interest for the month (2) 1,485
1,485 Sales Revenue
(9) 38,000
Insurance for 1 year Merchandise Inventory (10) 14,850
to the period they are actually applicable. (3) 137,500 (14) 38,140 52850
Insurance for 1 month (13) 49,940
149,300 Accrued Wages
(16) 440
Furnitures and Fixtures 440
(4) 15,500
(20) 1,760 Depreciation Expense
17,260 (21) 144
144
Advertising Expense
(5) 1,320 Accumulated Depreciation
1,320 (21) 144
144
Wages Expense
(6) 935 Interest Expense
(15) 688 (22) 1,250
(16) 440 1,250
2063
Interest Payable
(22) 1,250
Office Supplies Expense 1,250
(7) 1,100
1,100 Insurance Expense
 (23) 193
Utilities Expense 193
(8) 275
(19) 226
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 (23) 193
2117
Question 5 T accounts
Closing Entries

#24 Cash
DR Sales Revenue 52,850 (1) 165,000
CR Income Summary 52,850 (9) 38,000
(11) 3,614
#25 (12) 96,195
DR Income Summary 46,196
CR Expenses** 46,196
**Total expenses

#26
DR 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
0
Advertising Expense
(25) 1,320 Accumulated Depreciation
(21) 144
144
Wages 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 Depot
Income Statement
For the Month Ended September 30, 20XX

Net Sales $52,850

Cost 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 expense
Interest 1,250
Net Income $6,654

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

PC Depot
Balance Sheet
As of September 30, 20XX

Assets
Cash $84,661
Accounts 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' Equity

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

Total Liabilities and Owners' Equity $ 265,915

Profit Margin 13%