Question

Thompson Go-Karts sells motorized go-karts. Thompson Go-Karts are motorized and are typically purchased by amusement parks and other recreation facilities, but are also occasionally purchased by individuals for their own personal use. The company uses a perpetual inventory system. Selected transactions in the month of December follow (Click the icon to view the transactions.) Read the requirements Requirement 1. Prepare the journal entries to record the transactions shown. Omit explanations. (Record debits first, then credits. Explanations are not required. For situations that do not require an entry, make sure to select "No entry required in the first cell in the "Accounts column and leave all other cells blank.) Dec 1: Thompson sold 12 go-karts on account. The selling price of each go-kart was $1.700, the cost of goods sold for each was $400. Do not record the cost related to the sale. We will do this in the next joumal entry Journal Entry Accounts Date Debit Credit Dec 1 an office building on th Now record the cost related to the sale above. Journal Entry Accounts Debit Credit Date Dec Choose from any list or enter any number in the input fields and then continue to the next question

Answer 1

The required journal entries for the given transactions is shown as follows:-

Journal Entry (Amounts in $)

Date	Accounts	Debit	Credit
Dec 1	Accounts Receivable (12*$1,700)	20,400
	Sales Revenue		20,400
Dec 1	Cost of goods sold (12*$400)	4,800
	Inventory		4,800
Dec 5	No Journal Entry required (because there is no estimate of potential loss amount)
Dec 20	Warranty Expense	750
	Cash		750
Dec 22	No Journal Entry required (because there is no legal merit in the case)
Dec 27	Loss from Lawsuit	150,000
	Accrued Liability from Lawsuit		150,000
Dec 31	Warranty Expense (760,000*6%)	45,600
	Accrued Warrant Payable		45,600

Notes:-

1) For the transaction on Dec 5, no entry required because for providing for any loss or liability there are various conditions (i.e. the loss is reasonably certain and the loss can be estimated). In this case there is no estimation of loss from lawsuit, therefore no journal entry is required.

2) Similarly for the transaction on Dec 22, there is no legal base for the case hence no journal entry required