Management_120A_Course_Reader_Solutions_-_Rev_L1

Management_120A_Course_Reader_Solutions_-_Rev_L1 - 120A...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
COURSE READER SOLUTIONS Danny S. Litt Student Name: ___________________________________________ Student ID Number: _______________________________________ Intermediate Financial Accounting Management 120A
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
DANNY S. LITT MANAGEMENT 120A COURSE READER SOLUTIONS - REV L1 Page | 1 Problem: Danny’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October 1, 2009. The following transactions occurred during the month. a) Common stock of $90,000 was sold to start the business b) Equipment consisting of mixers and ovens were acquired October 1 for $30,000 cash. The equipment is expected to last five years and has a salvage value of $5,000. Management uses the straight-line method of depreciation. c) Ingredients costing $15,000 were purchased on account during the month and all but $5,000 was paid for by the end of the month. d) Rent is $500 a month. October, November and December’s rent were paid October 5. e) A payment of $800 for utilities was made during the month. f) Sixty percent of the ingredients purchased in c) were prepared and sold for $35,000 on account; $26,000 was collected on account receivable during the month. g) Wages of $5,200 were paid during the month. Moreover, wages for the last three days of the month amounted to $400 and will be paid during the first week of November. h) $12,000 was borrowed from the bank for additional working capital requirements, and $3,000 was repaid by month-end. Interest on the unpaid loan balance amounted to $450 at the end of October and was paid on November 5. Required: Prepare the required journal entries and adjustments, an income statement and balance sheet, in good form, for Danny’s Chocolate Chips and More as of October 31, 2009.
Background image of page 2
DANNY S. LITT MANAGEMENT 120A COURSE READER SOLUTIONS - REV L1 Page | 2 Problem Solution: Journal Entries: a. DR Cash $90,000 CR Contributed capital $90,000 b. DR Equipment $30,000 CR Cash $30,000 DR Depreciation expense $ 417 CR Accumulated depreciation $ 417 ($30,000 - $5,000/ 60 months) c. DR Inventory $15,000 CR Accounts payable $15,000 DR Accounts payable $10,000 CR Cash $10,000 d. DR Rent expense $ 500 DR Prepaid rent 1,000 CR Cash $ 1,500 e. DR Utilities expense $ 800 CR Cash $ 800 f. DR Accounts receivable $35,000 CR Revenue $35,000 DR Cash $26,000 CR Accounts receivable $26,000 DR Cost of goods sold $9,000 CR Inventory $ 9,000 ($15,000 x .60 = $9,000) g. DR Wages expense $ 5,600 CR Wages payable $ 400 CR Cash 5,200 h. DR Cash $12,000 CR Notes payable $12,000 DR Notes payable $ 3,000 CR Cash $ 3,000 DR Interest expense $ 450 CR Interest payable $ 450
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
DANNY S. LITT MANAGEMENT 120A COURSE READER SOLUTIONS - REV L1 Page | 3 Problem Solution continued. Income Statement & Balance Sheet
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/23/2010 for the course MGMT 260-491-20 taught by Professor Litt during the Spring '10 term at UCLA.

Page1 / 25

Management_120A_Course_Reader_Solutions_-_Rev_L1 - 120A...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online