Reference no: EM132759273

Problem 1: Gemma and Audrey are in partnership. Their capital balances at the end of the accounting period are $200 000 and $150 000 respectively. Gemma decides to make a permanent cash withdrawal from her capital account of $75 000. Assuming the fixed capital balances method (method 2) is used, the accounting entry to record this transaction is:

Select one:

a. DR Gemma retained earnings account $75 000; CR Profit distribution account $75 000

b. DR Gemma retained earnings account $75 000; CR Bank account $75 000

c. DR Gemma capital account $75 000; CR Profit distribution account $75 000

d. DR Gemma capital account $75 000; CR Bank account $75 000

Problem 2: Uncle Bob's Car Sales provides a one-year labour and parts warranty with every car solD. It is expected that 1500 cars will be sold during the year. Past records show that about 6% of cars require warranty repairs at an average cost of $300 per car. What is the accounting entry to record the expected warranty expense for the year?

Select one:

a. DR Provision for warranties $27 000; CR Warranty expense $27 000

b. No entry is required

c. DR Provision for warranties $27 000; CR Bank $27 000

d. DR Warranty expense $27 000; CR Provision for warranties $27 000