[ramonacraciun]

The checks are prepaid . If each check is for 76294 this means we have 76294/3=25431 per month for rent.
The entry for each check is :

Debit rent expense 25431
Debit prepaid account 50863
Credit bank account 76294

[ramonacraciun]

Gross profit = Open inventory + Purchase – Closing inventory

Let’s say for example that you have the following numbers
Open inventory = 150000
Purchase = 10000
Closing inventory = 15000
By using this numbers you will get a gross profit of 150000+10000-15000=145000
If the closing inventory were overstated by 5000 , then the closing inventory in our example would be 10000.
The gross profit will now be 150000+10000-10000=150000 so 5000 higher than the previous example .
If closing inventory is overstated , the gross profit is understated.

[ramonacraciun]

Q2 – The logic is that we consider the things in reverse , and trying to figure out what is the correct inventory count , if we would have counted on May 31, that is before all the transactions took place.
The purchase of goods after May 31 means that if we would have counted on May 31 , that purchased goods will not have been there , so – 8600.
The sale of goods ( 14000*30%=4200-14000=9800 on costs ) if we have counted on May 31 that sale will not take place until 4 days later that means that goods will count on inventory so + 9800.
The goods return to the vendor will have been there for the count on May 31 so we add them , + 700.
The final answer is 836200-8600+9800+700=838100 answer A.

Q3 – If the revenue is understated that means that instead of 80000 the revenue should be 90000.
If the closing inventory is overstated that means that instead of 20000 the gross profit should be 25000.
If we calculate the gross profit % 25000 / 90000 = 27.78 , answer D 27.8%

[ramonacraciun]

Can you be more specific ? Maybe give an example on a problem that you could not solve .

[ramonacraciun]

You need to open 3 T for Discounts received account, Discount allowed account and Suspense account.
The first entry is the wrong entry for Discounts allowed and received that means credit disc. received for 3840 and debit disc. allowed for 2960.
To correct the 3840 entry you need to make an entry debit 3840 disc, received and credit suspense account for 3840. This one fixed the error. now you need to make the correct entry so another entry for debit 3840 disc. allowed and credit suspense account. At this point you have in your T for disc. received debit 3840 and credit 3840 , for disc. allowed you have debit 3840 and debit 2960 and for suspense account you have credit 3840*2.
To correct the 2960 entry you need to make an entry debit suspense account , credit disc. allowed. Now post the correct entry , credit disc. received for 2960 debit disc. allowed .
Now you should have in your T account, without the beginning entry ( the wrong entry ) , for disc received debit 3840 credit 2960 , this means debit 880. For disc. allowed you should have debit 3840 credit 2960 this means again debit for 880 and for suspense account you should have debit 2960*2 and credit 3840 *2 this leaves you with a balance of 1760..

[ramonacraciun]

Yes i know that expenses doesn’t show on the balance sheet . What I was saying is that in my opinion your explanation is the correct one for payable motor account not motor expenses account. Maybe I misunderstood the requirement.

[ramonacraciun]

Initial stock = 50 *40
Purchase = 100*45
Sold = 80 that means 50 from the initial stock and 30 from the purchase . This means closing inventory so far (100-30)*45 – 70*45
Purchase = 50*50
Sold = 60 that means 60 units from the previous closing inventory of 70*45. This leaves you with closing final inventory of :
(70-60)*45 = 10*45 = 450
last purchase 50*50 = 2500
Closing inventory 2950

[ramonacraciun]

Let’s consider the acquisition cost of the asset as X . We will have the follow equation :

16050 + (X – 0.055X)=120000 ( 0.055 is the depreciation ratio as 2% for year for 33 months from January 01 to September 03 – (2/100)/12*33 = 0.055
0.945X=120000-16050=103950
X=103950/0.945 = 110000
The acquisition cost on January 2001 was 110000.

[ramonacraciun]

I don’t understand …. the question said that we need the expense amount in the income statement .Isn’t your answer the correct answer for payable motor expense that should be in the balance sheet not in the income statement ?

[ramonacraciun]

I think like this :

Prepaid (38000/12*3)=9500 for july+aug+sep
Total prepaid = 8200+9500 = 17700
Expense 38000 – 9500 = 28500

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