Problem 2-1

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 | |