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P9-2

P9-2. Presented by: Leo Ashley David Sungtae Taiyuan. Jan. 8 Purchased merchandise for resale on account at an invoice cost of $25,000; assume a periodic inventory system. Journal Entry:. Purchases (+A). $25,000. Account Payable (+L).

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P9-2

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  1. P9-2 Presented by: Leo Ashley David Sungtae Taiyuan

  2. Jan. 8 Purchased merchandise for resale on account at an invoice cost of $25,000; assume a periodic inventory system. • Journal Entry: Purchases (+A) $25,000 Account Payable (+L) $25,000 • Adjusted Entry for December 31, 2006: N/A, the debt is paid on Jan.17 • Current ratio is decreased • Cash flow from operating activities is no effect

  3. Jan. 17 Paid January 8th invoice • Journal Entry: Account Payable (-L) $25,000 Cash (–A) $25,000 • Adjusted Entry for December 31, 2006: N/A • Current ratio is increased • Cash flow from operating activities will decrease

  4. Apr. 1 Borrowed $40,000 from National Bank for general use; Execute a 12-Month, 12 Percent interest bearing not payable • Journal Entry: Cash (+A) $40,000 Note Payable (+L) $40,000 • Adjusted Entry for December 31, 2006: Interest expense (+E, -SE) $3,600 Interest payable (+L) $3,600 • Current ratio is decreased • Cash flow from operating activities is no effect

  5. June 3 Purchased Merchandise for resale on account at an invoice cost of $18,000 • Journal Entry: Inventory (+A) $18,000 Account Payable (+L) $18,000 • Adjusted Entry for December 31, 2006: N/A, the debt is paid on July 5 • Current ratio is decreased • Cash flow from operating activities is no effect

  6. July 5 Paid June 3 invoice • Journal Entry: Account Payable (-L) $18,000 Cash (-A) $18,000 • Adjusted Entry for December 31, 2006: N/A • Current ratio is increased • Cash flow from operating activities is decreased

  7. Aug. 1 Rented a small office in a building owned by the company and collected six months’ rent in advance amounting to $5,100. (Record the collection in a way that will not require an adjusting entry at year-end.) • Journal Entry: Cash (+A) $5,100 Unearned revenue (+L) $ 850 Rent revenue (+R, +SE) $4,250 • Adjusted Entry for December 31, 2006: N/A, since we assumed that five months’ revenue has been earned, we don’t need to adjust entry. • Current ratio is increased • Cash flow from operating activities is increased

  8. Dec. 20 Received a $500 deposit from a customer as a guarantee to return a large trailer “borrowed” for 30 days. • Journal Entry: Cash (+A) $500 Deposit(+L) $500 • Adjusted Entry for December 31, 2006: N/A, $500 has to be returned 30 days from Dec. 20; therefore, there is no need for adjusting entry. • Current ratio is decreased • Cash flow from operating activities is increased

  9. Dec 31 Determined Wages of $10,000 earned but not yet paid on December 31 ( disregard payroll taxes) • Journal Entry: Wage expense (+E, -SE) $10,000 Wagepayable (+L) $10,000 • Adjusted Entry for December 31, 2006: N/A, same as above • Current ratio is decreased • Cash flow from operating activities is no effect

  10. Balance sheet at December 31, 2006 Liabilities: Wages payable (Dec.31) $10,000 Return on deposit (Dec.20) $ 500 Unearned revenue (Aug.1) $ 850 Note payable (Apr.1) $40,000 Interest payable (Apr.1) $ 3,600 ----------------------------------------------------- Total $54,950

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