Problem 2-1

Only available on StudyMode
  • Download(s) : 498
  • Published : June 10, 2012
Open Document
Text Preview
1. Explain the events that probably gave rise to journal entries 1 through 8 of exhibit 1. a. Entry 1: Miss barbarra Thompson opened the company investing USD 65,000.00 cash and USD 100,000.00 from Bank Borrowings. b. Entry 2: The company paid its Rent amounting to USD 1,485.00 c. The company bought inventory items worth USD 137,500.00 on credit. d. The company bought Furnitures and Fixtures (10 years useable life) for cash amounting to USD 15,500.00 e. The company utilized USD 1,320.00 worth of advertising and paid it with cash. f. The company paid its wages worth USD 935.00

g. The company bought USD 1,100.00 worth of office supplies. h. The company paid its utilities worth USD 275.00

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

Cash
Debit| Credit|
1 USD 165,000.00| 2 USD 1,485.00|
| (4) USD 15,500.00|
| (5) USD 1,320.00|
| (6) USD 935.00|
| (7) USD 1,100.00|
| (8) USD 275.00|
Rent Expense
Debit| Credit|
(2) USD 1,485.00|

Merchandise Inventory
Debit| Credit|
(3) USD 137,500.00|

Accounts Payable
Debit| Credit|
| (3) USD 137,500.00|

Furnitures and Fixtures
Debit| Credit|
(4) USD 15,500.00|

Advertising Expense
Debit| Credit|
(5) USD 1,320.00|

Wages Expense
Debit| Credit|
(6) USD 935.00|

Office Supplies Expense
Debit| Credit|
(7) USD 1,100.00|

Utilities Expense
Debit| Credit|
(8) USD 275.00|

Paid-In Capital
Debit| Credit|
| (1) USD 65,000.00|

Loan Payable
Debit| Credit|
| (1) USD 100,000.00|

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.)

#| Account| Dr.| Cr.|
(9)| Cash| 38,000.00| |
| Sales Revenues| | 38,000.00|
(10)| Accounts Receivable| 14,850.00| |
| Sales Revenues| | 14,850.00|
(11)| Cash| 3,814.00| |
| Accounts Receivable| | 3,814.00|
(12)| Accounts Payable| 96,195.00| |
| Cash| | 96,195.00|
(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 Expenses| 688.00| |
| Cash| | 688.00|
(16)| Wages Expenses| 440.00| |
| Wages Payables| | 440.00|
(17)| Rent Expenses| 1,485.00| |
| Cash| | 1,485.00|
(18)| Insurance Expenses| 2,310.00| |
| Cash| | 2,310.00|
(19)| Utilities Expenses| 226.00| |
| Utilities Payable| | 226.00|
(20)| Advertising Expense| 1,760.00| |
| Cash| | 660.00|
| Accounts Payable| | 1,100.00|

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. i. Prepaid Insurance is required to properly record the unused part of the insurance paid on entry number 18. If no Prepaid Insurance entry is maid, it is automatically assumed that the insurance paid for in entry 18 is already consumed. Replacement for Entry (18)

#| Account| Dr.| Cr.|
(18)| Prepaid Insurance| 2,310.00| |
| Cash| | 2,310.00|

Adjusting Entry for Entry (18)
#| Account| Dr.| Cr.|
(21)| Insurance Expense| 192.5| |
| Prepaid Insurance| | 192.5|

Adjusting Entry for Entry (4)
#| Account| Dr.| Cr.|
(22)| Depreciation Expense | 129.17| |
| Accumulated Depreciation| | 129.17|

5. Prepare closing entries and post to ledger accounts. What new ledger accounts are required? Why? j. Prepaid insurance is needed to properly record the unused and consumed part of the insurance....
tracking img