6-FoodLion Solution

6-FoodLion Solution - Food Lion, Inc.-Preparation of...

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Food Lion, Inc.—Preparation of Financial Statements a. Grocery store chains are just like any other retail chain. They acquire inventory from various sources, mark it up, and sell it. Thus, we would expect inventory to be a major asset. Another major asset would be the actual grocery stores (if owned or rented under capital lease). We wouldn’t expect much in the way of accounts receivable because the grocery business is essentially cash-based. The liability side of the balance sheet likely includes major balances for accounts payable (mainly financing the inventory) and long-term debt associated with the properties. b. 1. Dr. Inventories 7,222,670 Cr. Current Liabilities 7,222,670 To record purchase of inventory 2. Dr. Cash 8,476,918 Cr. Net Sales 8,476,918 To record cash sales Dr. Cost of Goods Gold 6,661,516 Cr. Inventories 6,661,516 To record cost of inventory sold for cash 3. Dr. Receivables 529,014 Cr. Net Sales 529,014 To record credit sales Dr. Cost of Goods Sold 410,409 Cr. Inventories 410,409 To record cost of inventory sold on account 4. Dr. Current Liabilities 7,115,247 Cr. Cash 7,115,247 To record payment of accounts payable to suppliers 5. Dr. Selling and Administrative Expenses 1,252,553 Cr. Cash 1,252,553 To record payment of wages and other expenses 6. Dr. Cash 250,010 Cr. Current Liabilities 250,010 To record issuance of short-term note 7. No entry because a transaction has not occurred. 8. Dr. Cash 505,846 Cr. Receivables 505,846 To record collection of receivables 9. Dr. Property, at cost less Depreciation 283,564 Cr. Cash 283,564 To record acquisition of property 1
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10. Dr. Noncurrent Liabilities 83,420 Cr. Cash 83,420 To record repayment of long-term debt 11. Dr. Inventories 49,229 Dr. Property, at cost less Depreciation 103,078 Dr. Goodwill 269,348 Cr. Cash 121,578 Cr. Noncurrent Liabilities 300,077 To record acquisition of Kash ‘n Karry chain of stores 12. Dr. Cash 27,464 Dr. Selling and Administrative Expenses 466 Cr. Property, at cost less Depreciation 27,930 To record disposal of fixed assets at a loss 13. Dr. Interest Expense 76,631 Cr. Cash 76,631 To record payment of interest 14. No entry. Any increase in wages will be on the income statement for the following fiscal year when the wages are earned. 15. Dr. Noncurrent Liabilities 12,258 Cr. Cash 12,258 To record payment of noncurrent liabilities 16. Dr. Cash 3,086 Cr. Contributed Capital (common stock) 3,086 To record issuance of stock 17. Dr. Property, at cost less Depreciation 97,595 Dr. 12,703 Dr. Contributed Capital 4,412 Dr. Retained Earnings 39,006 Cr. Current Liabilities 31,500 Cr. Noncurrent Liabilities 77,871 Cr. Cash 44,345 To record lease, debt and stock repurchase transactions 18. Dr. Retained Earnings 52,310 Cr. Cash 52,310 To record declaration and payment of dividends 19. Dr. Income Tax Provision 131,700 Dr. 25,789 Dr. 3,511 Cr. Cash 155,422 Cr. Current Liabilities 5,578
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6-FoodLion Solution - Food Lion, Inc.-Preparation of...

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