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 Current ratio is decreased Cash flow from operating activities is no effect Adjusted Entry for December 31, 2006: N/A, the debt is paid on Jan.17

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

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 Current ratio is decreased Cash flow from operating activities is no effect Adjusted Entry for December 31, 2006: Interest expense (+E, -SE) $3,600 Interest payable (+L) $3,600

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 Current ratio is decreased Cash flow from operating activities is no effect Adjusted Entry for December 31, 2006: N/A, the debt is paid on July 5

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

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 Current ratio is increased Cash flow from operating activities is increased 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. Rent revenue (+R, +SE)$4,250

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 Current ratio is decreased Cash flow from operating activities is increased 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.

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 Wage payable (+L) $10,000 Current ratio is decreased Cash flow from operating activities is no effect Adjusted Entry for December 31, 2006: N/A, same as above

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