ACCT
Homework 5 solutions.pdf

# Homework 5 solutions.pdf - Practice Problems for Chapter 7...

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Practice Problems for Chapter 7 Solutions 1. GCC Revisited. Review the Green Car Company examples in Chapter 7. A. Create dr/cr style journal entries for these, Green-Car-Co. events: a. Buys a car to refurbish for \$18,000 plus \$200 for delivery to GCC’s shop. (All of this is inventory). GCC pays for the car on a credit card and pays the transportation fee in cash. Dr Inventory \$18,200 (A) Cr Cash \$200 (A) Cr A/P \$18,000 (L) Or Dr Inventory \$18,000 (A) Cr A/P \$18,000 (L) Dr Inventory \$200 (A) Cr Cash \$200 (A) b. Works on the car (in its one-bay, one-worker shop) for 3 days, during which time no expenses are paid (except as explicitly stated otherwise), and: i) GCC’s shop rent and utilities cost is \$40/day. ii) Its refurbishing worker’s daily salary is \$200. iii) The CFO’s daily salary is \$400. iv) The back-office and executive-suite rent is \$200 per day. v) The accounting staff daily salary is \$220. vi) The car’s AC unit is broken by accident, making it completely worthless. The cost of the unit is \$500. vii) A new AC unit for the car is purchased for \$500 on account. (IE: GCC is invoiced for the purchase). i) Dr Inventory \$120 (A) Cr Accrued rent and utilities \$120 (A) ii) Dr Inventory \$600 (A) Cr Accrued Salary (Inventory) \$600 (L) iii) Dr Salary Expense (SGA) \$1,200 (E) Cr Accrued Salary \$1,200 (L) iv) Dr Rent Expense (SGA) \$600 (E) Cr Accrued Rent \$600 (L) v) Dr Salary Expense (SGA) \$660 (E) Cr Accrued Salary \$660 (L) vi) Dr Inventory write off expense \$500 (E) Cr Inventory \$500 (A) vii) Dr Inventory \$500 (A) Cr Accounts Payable (or AP) \$500 (L) c. At the end of the third day, GCC sells the car for \$30,000, receiving \$25,000 in cash and an interest-free note for the remaining \$5,000. Dr Cash \$25,000 (A) Dr Note Receivable \$5,000 (A)

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Cr Revenue \$30,000 (E) Dr COGS \$18,920 (E) Cr Inventory \$18,920 (A) B. Prepare an Income Statement for the period.
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• Summer '09
• Chicler
• Balance Sheet, Generally Accepted Accounting Principles, Net PPE

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