Cases CASE 4-1 a PC Depot” Depot was a retail store for personal computers hand-held calculators, selling several national brands in each product line. The store was opened in carly September by Barhara Thompson, a young woman previously employed in direct computer sales for a national firm specializing in business 70 Prefer Robert. Anthony, Harvard Barnes School EXHIBIT] General Journal 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 reopening financial trans- actions in journal form to serve as an example (Exhibit 1). Thompson agreed to write up the remainder of the store's September financial transactions for Jarrard’ Inter review: At the end of September, Thompson had the fol- lowing items to record: Entry Number (1) Cash Bank Loan Payable (15%) Proprietors Capital (2), Rene Expense (September) Cash. (3) Merchandise Inventory ‘Accounts Payable Account (4). Parninute and Fixeures (10-year life) 15,500 Cash. 15,500 (5) Advertsing Expense 1320 Cash. 1,320 (6) Wages Expense 935 Cash. 935 (1) Office Supplies Expense 1.100 Cash. 1,100 (8). Unites Expense Cash. us (9). Cash sles for Seprember. $38,000 (10) Ceedir sales for September. 14,850, (11) Cash received feom exedit customers 3614 (12) Bills paid co merchandise suppliers 96,195 (13) New merchandise received on credit fom supplier 49.940 (14) Ms. Thompson atcertained the eos of merchandise sold was 38,140 (15) Wages paid co asisane 688 (16) Wages earned but unpaid ar che end of September. 40 (17) Rene paid for October 1.485 (18) Insurance bil pad for ane year (September IAugust 31) 2,310 (19) Bills received, bue unpaid, from electric company 26 (20) Purchased sign, paying $660 cash and agreeing to pay the $1,100 balance by December 31 1,760Srtems Questions 1. Explain che events thar probably gave rie ro journal entries I through 8 of Exhibit 1 2, Setup aledger accoune (in T account form) for each account named in che general journal. Post entries 1 through 8 to these accounts, using the entry number as a cross-reference 3, Analyze the facts listed ar 9 through 20, resolving them into their debit and credit elements, Prepare journal CASE 4-2 Save-Mart" Save-Mare was a retail store. Its account balances on. February 28 (the end of its fiscal year), before adjust ments, were as shown below. ‘entries and post tothe ledger accounts, (Do nor prepare closing entsies.) 4. Consider any other transactions that should be recorded. ‘Why ate these adjusting enties required? repase journal ‘nities for them and post to ledger accounts. 5, Prepare closing enties and post to ledger accounts, What new ledger accounts are required? Why! Prepare an income statement for September and a balance sheet at of September 30 Debit Balancer Cat, $88,860 Accounts receivable 127,430 Merchandite inventory snr 993,139 Store equipment « 70,970 Supplies inventory 17,480 Prepaid insurance. 12,480 Selling expense ws 10,880 Sales slaves . a1 Miscellaneous general expense 18,930 Sales discounts 3340 Interest expense 7100 Social security tax expense 3,400 Total $3,311,090 Credit Balances ‘Accumulated depreciation on tore equIpMER eveneenemenneennennnnrenee $ 1,420 Notes payable 88,590 Accounts payable 88,970 (Common stock. 169,000 Retained earnings. 33,500 Sales 985,700 Tol The data for the adjustments are 1, Cost of merchandise sold, $604,783. 2. Store equipment had a useful life of seven years. (Alll equipment was less than seven years old.) 3. Supplies inventory, February 28, $3,877, (Pur chases of supplies during the year were debited to the Supplies Inventory account.) 4. Expired insurance, $7,125. 5. The note payable was at an interest rate of 9 per: cent, payable monthly. Ithad been outstanding ‘throughout the year. 70 Prefer Robert N Anthony, Harvard Barnes School 12 6. Sales salaries eamed but not paid to employees, $2,340. 7. The statement sent by the bank, adjusted for checks outstanding, showed a balance of $88,110. The difference represented bank ser- vice charges: Questions 1. Setup T accounts withthe balances given above. 2. Jourmalie and post adjusting entries, adding other T accounts a necessary 3. Joumalie and post closing entries 4. Prepare an income statement forthe year and a balance sheet as of February 2.