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 stores preopening financial transactions in journal form to serve as an example (Exhibit 1). Thompson agreed to write up the remainder of the stores September financial transactions for Jarrards later review.

Exhibit 1

Amount EntryNumber Account Dr. Cr. (1) Cash 165,000 Bank Loan Payable (15%) 100,000 Proprietors Capital 65,000 (2) Rent Expense 1,485 (September) Cash 1,485 (3) Merchandise Inventory 137,500 Accounts Payable 137,500 (4) Furniture and Fixtures 15,500 (10-year life) Cash 15,500 (5) Advertising Expense 1,320 Cash 1,320 (6) Wages Expense 935 Cash 935 (7) Office Supplies Expense 1,100 Cash 1,1 00 (8) Utilities Expense 275 Cash 275

At the end of September, Thompson had the following items to record:

Entry Amount Account Cr. Number

(9) Cash sales for September $38,000 (10) Credit sales for September 14,850 (11) Cash received from credit customers 3,614 (12) Bills paid to merchandise suppliers 96,195 (13) New merchandise received on credit from supplier 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 one year (September 1-August 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 by December 31 1,760

Questions

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. Prepare journal entries and post to the ledger accounts. (Do not prepare closing entries.)

4. 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 of September 30.