Gilles Inc started on January 1 to manufacture widgets. It has been an eventful month but now the owner realizes he has not kept up with the accounting. On Jan 31, he is trying to catch up as the company is about to close its books for the month.

Events:

1) On Jan 1, the company. a) purchased inventory on credit for $100K. b) borrowed $60K from its owner (interest free). The loan will be paid back in 10 years.

2) On Jan 15, the company hired several retail employees.

3) On Jan 31, it paid retail employees:

a) $20K for hours worked this month

b) $5K for hours to be worked next month

4) On Jan 15, Gilles paid $35K for shares in another company.

5) On Jan 20, Gilles held training session for company managers at cost of $30K (will be paid later in February)

6) On Jan 31, Gilles has used, but have not yet paid, utilities: a) $2,000 at corporate office b) $3,000 at production plant

7) On Jan 1, Gilles bought some manufacturing equipment for $400k and some office

furniture for 100 K (paid cash).

8) On Jan 22, Gilles was billed $110,000 for ads that ran in magazines this prior week (to be paid next month).

9) On Jan 31, Gilles recognized the depreciation for the month: a) $5,000 for some office furniture b) $20,000 for the manufacturing equipment

10) On Jan 31, Gilles sold 10 widgets this month (on credit). The sales price was $450,000. The cost was $95,000.

11) Gilles offers a warranty for it product. Historically, the average warranty cost has been $500 per widget. The company issues a partial refund (i.e., cash) when a widgets is brought back. None of these widgets has been brought in for repairs under warranty yet.

Question

a) Event 13: Gilles owner decided to charge 12% per year for the $60,000 loan to the company (payable on Dec 31 of every year). Prepare the relevant journal entry. First, use a T-account format then use the standard journal entry format.

b) Prepare the journal entries for Events 9. First, use a T-account format then the standard journal entry format.

c) Close the books for Gilles Inc (do NOT skip Events 9, 10, 12 or 13). First, use a T- account format then the standard journal entry format.

d) Prepare the balance sheet and the income statement for Gilles Inc (as of Jan 31). Verify that Assets = Liabilities + Owners Equity

e) Prepare the journal entries for the following two events. First, use a T-account format then the standard journal entry format.

A. On Feb 15, the company sold a piece of equipment for $10,000. It bought it for $12,000 and depreciated it for $5,000 before selling it.

B. On Feb 16, the company sold another piece of equipment for $13,000. It

bought it for 20,000 and depreciated it for $4,000 before selling it.