PC Depot was a retail store for personal computers and handheld calculators, selling several nati

PC Depot was a retail store for personal computers and handheld calculators, selling several national brands in each product line. The store was opened in early September by Barbara Thompson, a young woman previously employed in direct computer sales for a national firm specializing in business computers.

Thompson knew the importance of adequate records. One of her first decisions, therefore, was to hire Chris Jarrard, a local accountant, to set up her bookkeeping system.

Jarrard wrote up the store’s preopening financial transactions in journal form to serve as an example (Exhibit 1). Thompson agreed to write up the remainder 112113of the store’s September financial transactions for Jarrard’s later review.

EXHIBIT 1 – General Journal

Entry Number Account Debit Credit
1 Cash 165,000 Bank Loan Payable 100,000
Proprietor’s Capital 65,000
2 Rent Expense (September) 1,485
Cash 1,485
3 Merchandise Inventory 137,500
Accounts Payable 137,500
4 Furniture and Fixture’s (10-Yr Life) 15,500
Cash 15,500
5 Advertising Expense 1,320
Cash 1,320
6 Wages Expense 935
Cash 935
7 Office Supplies Expense 1,100
Cash 1,100
8 Utilities Expense 275
Cash 275

At the end of September, Thompson had the following items to record:
Entry Number Account Credit
9 Cash Sales for September 38,000
10 Credit Sales for September 14,850
11 Cash Received from Customers 3,614
12 Bills paid to merchandise suppliers 96,195
13 New merchandise received on credit from suppliers 49,940
14 Ms. Thompson ascertained the cost of merchandise sold was 38,140
15 Wages paid to assistant 688
16 Wages earned but unpaid at the end of September 440
17 Rent paid for October 1,485
18 Insurance bill paid for 1 yr. (Sept. 1 –Aug. 31) 2,310
19 Bills received, but unpaid, from electric company 226
20 Purchased sign, paying $660 cash and agreeing to pay
The $1,100 balance byDecember 31 1,760

1. Explain the events that probably gave rise to journal entries 1 through 8 of Exhibit 1.

2. Set up a ledger account (in T account form) for each account named in the general journal. Post entries 1 through 8 to these accounts, using the entry number as a cross-reference.

3. Analyze the facts listed as 9 through 20, resolving them into their debit and credit elements.

4. Prepare journal entries and post to the ledger accounts. (Do not prepare closing entries.) Consider any other transactions that should be recorded. Why are these adjusting entries required? Prepare journal entries for them and post to ledger accounts.

5. Prepare closing entries and post to ledger accounts. What new ledger accounts are required? Why?

6. Prepare an income statement for September and a balance sheet as ofSeptember 30.