ACCOUNTING

INTRODUCTION
PC DEPOT
Case Written by Prof. Robert N. Anthony

P C Depot was a retail store for personal computers and hand-held calculators, selling several

CYCLE
TO FINANCIAL ACCOUNTING
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 of the store’s September
financial transactions for Jarrard’s later review.
Entry Amount
Number Account Dr. Cr.
(1) Cash 165,000
Bank Loan Payable (15%) 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 Fixtures (10-year life) 15,500

Cash 15,500

(5) Advertising Expense 1,320

Cash 1,320

(6) Wages Expense 935 BA 552 – FINANCIAL ACCOUNTING

Cash 935

(7) Office Supplies Expense 1,100

Cash 1,100

(8) Utilities Expense 275

Cash 275
Exhibit 1. General Journal

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

1
 Entry
Number Transaction Amount
(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 merchadise 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
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 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.
4. Consider any other transactions that should be recorded. Why are these 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.