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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