CASE 4-1 | PC DEPOT

CHAPTER 4 - ACCOUNTING RECORDS & SYSTEMS

Contents:
01 Facts of the Case

Brief background of the business

02 Questions

• Understanding journal entries

• Ledger account set-up
• DR/CR analysis
• Income Statement preparation
Fact of the Case
FACTS OF THE CASE
PC Depot was a retail store
for personal computers and
01 hand-held calculators, selling
several national brands in
each product line.

Opened in early September

02 by Barbara Thompson.

Thompson hired Chris Jarrard,

03 a local accountant, to set up
her bookkeeping system.
 Explain the events that
probably gave rise to
Question 1 journal entries 1 through 8
of Exhibit 1.
 Explain the events that
probably gave rise to
Question 1 journal entries 1 through 8
of Exhibit 1.
 Set up a ledger account (in T account
form) for each account named in the
Question 2 general journal. Post entries 1 through
8 to these accounts, using the entry
number as a cross-reference.

01 02 03
Cash Rent Expense (September) Merchandise Inventory
1 165,000 2 1,485 3 137,500

Bank Loan Payable Cash Accounts Payable

1 100,000 1 165,000 3 137,500
2 1,485

Owner's Capital
1 65,000
 Set up a ledger account (in T account
form) for each account named in the
Question 2 general journal. Post entries 1 through
8 to these accounts, using the entry
number as a cross-reference.

04 05 06
Furniture and Fixtures Advertising Expense Wages Expense
4 15,500 5 1,320 6 935

Cash Cash Cash

1 165,000 1 165,000 1 165,000
2 1,485 2 1,485 2 1,485
4 15,500 4 15,500 4 15,500
5 1,320 5 1,320
6 935
 Set up a ledger account (in T account
form) for each account named in the
Question 2 general journal. Post entries 1 through
8 to these accounts, using the entry
number as a cross-reference.

07 08
Cash
Office Supplies Expense Utilities Expense 1 165,000
7 1,100 8 275 2 1,485
4 15,500
5 1,320
6 935
Cash Cash
7 1,100
1 165,000 1 165,000
2 1,485 2 1,485 8 275
4 15,500 4 15,500 165,000 20,615
5 1,320 5 1,320 Balance 144,385
6 935 6 935
7 1,100 7 1,100
8 275
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

General Journal

Entry Account Debit Credit Entry Account Debit Credit

1 Cash 165,000.00 5 Advertising Expense 1,320.00

Bank Loan Payable 100,000.00 Cash 1,320.00
Owner's Capital 65,000.00
6 Wages Expense 935.00
2 Rent Expense 1,485.00
Cash 935.00
Cash 1,485.00

3 Merchandise Inventory 137,500.00 7 Office Supplies Expense 1,100.00

Accounts Payable 137,500.00 Cash 1,100.00

4 Furniture and Fixtures 15,500.00 8 Utilities Expense 275.00

Cash 15,500.00 Cash 275.00
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

DEBIT & CREDIT ELEMENT

Entry Account Debit Credit

9 Cash 38,000.00
Sales 38,000.00

10 Accounts Receivable 14,850.00

Sales 14,850.00

11 Cash 3,614.00
Accounts Receivable 3,614.00

12 Accounts Payable 96,195.00

Cash 96,195.00
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

DEBIT & CREDIT ELEMENT

Entry Account Debit Credit

13 Merchandise Inventory 49,940.00

Accounts Payable 49,940.00

14 Cost of Sales 38,140.00

Merchandise Inventory 38,140.00

15 Wages Expense 688.00

Cash 688.00

16 Wages Expense 440.00

Accrued wages 440.00
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

DEBIT & CREDIT ELEMENT Entry Account Debit Credit

17 Prepaid rent 1,485.00

Cash 1,485.00

18 Prepaid Insurance 2,310.00

Cash 2,310.00

19 Utilities Expense 226.00

Accounts Payable 226.00

20 Furniture and Fixtures 1,760.00

Cash 660.00
Accounts Payable 1,100.00
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

LEDGER
Cash Merchandise Inventory Accounts Payable
1 165,000 2 1,485 3 137,500 14 38,140 12 96,195 3 137,500
9 38,000 4 15,500 13 49,940 13 49,940
11 3,614 5 1,320 187,440 38,140 19 226
6 935 149,300 20 1,100
7 1,100 96,195 188,766
8 275 92,571
12 96,195
15 688
17 1,485
18 2,310
20 660
206,614 121,953
84,661
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

LEDGER

Prepaid Insurance Furniture and Fixtures Accounts Receivable

18 2,310 4 15,500 10 14,850 11 3,614
2,310 20 1,760 14,850 3,614
17,260 11,236

Rent Expenses Advertising Expense Wages Expense

2 1,485 5 1,320 6 935
1,485 1,320 15 688
16 440
2,063
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

LEDGER

Office Suppplies Expense Utilities Expense Accrued Wages

7 1,100 8 275 16 440
1,100 19 226 440
501

Bank Loan Payable Owner's Capital Prepaid Rent

1 100,000 1 65,000 17 1,485
100,000 65,000 1,485
 Analyze the facts listed as 9 through 20,
resolving them into their debit and credit
Question 3 elements. Prepare journal entries and
post to the ledger accounts. (Do not
prepare closing entries.)

LEDGER

Sales Cost of Sales

9 38,000 14 38,140
10 14,850 38,140
52,850
 Consider any other transactions that
should be recorded. Why are these
Question 4 adjusting entries required? Prepare
journal entries for them and post to ledger
accounts.

ADJUSTING ENTRIES

Depreciation Expense Accumulated Depreciation

21 144 21 144

Entry no. 21 - The depreciation of

the furniture and fixtures is $144.
Using straight line method =
(17,260/ 10 years) divided by 12
months
 Consider any other transactions that
should be recorded. Why are these
Question 4 adjusting entries required? Prepare
journal entries for them and post to ledger
accounts.

ADJUSTING ENTRIES

Interest Payable Prepaid Insurance

22 1,250 23 193

Entry No. 22 - Interest expense for

the month of September is $1,250 Entry No. 23 - Insurance Expense is
Interest expense = 100,000 * 15% 193. 2,310 divided by 12 months is
interest rate = 15,000 divided by 12 193
months = 1,250
 Prepare closing entries and post to ledger
Question 5 accounts. What new ledger accounts are
required? Why?

CLOSING ENTRIES

Sales Interest Expense Insurance Expense

24 52,850 22 1,250 21 144

Income Summary Retained Earnings

25 6,654 24 52,850 25 6,654
 Prepare an income statement for
Question 6 September and a balance sheet
as of September 30.
Income Statement
Thank you