HBS Online - FA 2 Recording Transactions

Which of the following accounts decreases with a credit? Select all that apply. Accrued Wages COGS Sales Preferred Stock Accounts Receivable Cash

COGS Accounts Receivable Cash

Which of the following is an expense account? Select all that apply. COGS Prepaid Expense Wages Payable Rent Expense Wages Expense

COGS Rent Expense Wages Expense

Which of the following accounts increase with a debit? Select all that apply. Cash Depreciation Expense Prepaid Rent Sales Revenue Deferred Revenue

Cash Depreciation Expense Prepaid Rent

Wise Guys Consulting receives payment in full totaling $9,000 from a client for services which were rendered and invoiced the previous month. What would be the impact at the time the payment is received?

Cash (Assets) debit 9k Accounts Receivable (Assets) credit 9k

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the cost of the inventory transfer on the books of Traxx?

COGS debit 7k Inventory credit 7k

Cash decreases with a: Debit/Credit

Credit Assets decrease with a credit

Accounts Payable increase with a: Debit/Credit

Credit Liabilities increase with a credit

Categorize items into assets, liabilities, owner's equity

Assets: Cash equivalents Notes receivable Other prepaid expenses Investments Prepaid Insurance Inventories Liabilities: Accounts Payable Short-term debt Owner's Equity: Revenue Common stock

Suppose that on January 1, 2014 Cardullo's paid $2,400 for 12 months of insurance coverage for the coming year. What would be the impact on this date? What would be the impact on January 31, 2014 when Cardullo's makes an adjustment to reflect that one month of the insurance coverage has been used up?

1/1/14 Prepaid Insurance debit 2.4k Cash credit 2.4k 1/31/14 Insurance expense debit 200 Prepaid Insurance credit $200

On January 1, 2015 Outback Subaru Limited, a Subaru dealership in Alice Springs, sold 2 cars to the town for $50,000 total. Outback had paid $37,000 to purchase the cars. The town was granted credit terms and permitted to pay in 30 days. On the same day of the sale, Outback Subaru Limited delivered the cars to the town. Consider both the revenue and cost of this transaction on the books of Outback Subaru Limited.What would be the impact on January 1, 2015, the date of the sale? On January 30, 2015 Outback Subaru Limited received payment in full from the town for the cars.What would be the impact of this transaction on this date?

1/1/15 (Delivery) Revenue credit $50k Accounts receivable debit $50k Inventory credit $37k COGS debit $37k Revenue credit $50k 1/30/15 (Payment) Cash debit $50k Accounts receivable credit $50k

Section 2.3.1 Needs to be reviewed

2.3.1

Suppose that on March 1, 2014 Cardullo's purchased an order of German chocolate from a supplier for $250, but didn't pay cash for the order until March 31, 2014. How would you record this transaction at the time of the purchase? How would you record the transaction at the time Cardullo's paid the $250 cash to the supplier?

3/1/14: (Purchase) Inventory debit $250 Accounts Payable credit $250 3/31/14: (Payment) Accounts Payable debit $250 Cash credit $250

Suppose on April 1, 2014 Cardullo's purchased 10 boxes of Harbor Sweets Chocolates for $25 per box; the chocolates are to be sold in the store. Later that month, on April 15, 2014, Cardullo's sold one of the Harbor Sweets Chocolates boxes to a customer for $40.

4/1/14: (Purchase) Inventory debit $250 Cash credit $250 4/15/14 (Sale) Cash debit $40 Sales credit $40 COGS debit $25 Inventory credit $25

On 4/1/14, Alphatestah, a software company, purchased office furniture for $24,000 on credit. On 4/30/14, Alphatestah, a software company, makes payment for $24,000 for office furniture that they purchased on credit.

4/1/14: (Purchase) P,P,&E debit $24k Accounts Payable credit $24k 4/31/14: (Payment) Accounts Payable debit $24k Cash credit $24k

On May 1, 2014 Tom's Grocery purchased 50 pounds of chicken to be used in the deli for $100. It paid for the chicken on May 20, 2014. What would the entry for the initial purchase on May 1, 2014 look like? Tom's Grocery paid for the chicken on May 20, 2014. What would the entry for this payment look like?

5/1/14: (Purchase) Inventory debit $100 Accounts Payable credit $100 5/20/14: (Payment) Accounts Payable debit $100 Cash credit $100

Supposed on June 30, 2013 Cardullo's received an electricity bill for $900 and paid it immediately.

6/1/13: Utility debit $900 Cash credit $900

Suppose on June 1, 2013 Cardullo's purchased 40 jars Vermeiren Cookie Spread as inventory from its supplier for $200. A month late, July 1, 2013, Cardullo's sold one of the Mermeiren Cookie Spread jars to a customer for $10. The cookie spread was originally purchased for $5 per jar.

6/1/13: (Purchase) Inventory debit $200 Cash credit $200 7/1/13: (Sale) Cash debit $10 Sales credit $10 COGS debit $5 Inventory credit $5

Suppose Bikram Yoga Natick sold six 3-month yoga memberships on July 1, 2013 for a total of $2,100. All of the customers paid in cash at the time of the purchase.What impact would the receipt of cash have on this date? On July 31, 2013, the yoga studio had provided one month of services out of the three month agreement.What would be the impact when Bikram Yoga Natick records the services provided for the month?

7/1/13 (Sales) Cash debit $2.1k Deferred Revenue credit $2.1k 7/31/13 (Service Provided) Deferred Revenue debit $700 Revenue credit $700

Suppose on September 1, 2013 Cardullo's purchased an order of Spicy Maya Hot Chocolate from the supplier for $100. Cardullo's has 30 days to pay the supplier. What would the journal entry for this purchase look like? 30 days later, Cardullo's paid for the hot chocolate. What would the journal entry for the payment made on September 30, 2013 look like?

9/1/13: (Purchase) Inventory debit $100 Accounts Payable credit $100 9/30/13: (Payment) Accounts Payable debit $100 Cash credit $100

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the revenue on the books of Traxx?

Accounts Receivable debit 16k Revenue credit 16k

Wise Guys Consulting issues an invoice for $9,000 to one of their clients for services provided. The terms of the invoice call for payment 30 days after the invoice date. What would be the impact at the date the services are completed and invoiced?

Accounts Receivable debit 9k Revenue credit 9k

Liabilities

Accounts, Interest, Notes, Current Portion of Notes, Wages, Taxes Payable Accrued Interest, Wages, Taxes Deferred Revenue Short & Long Term Debt Deferred Tax Liability Other Liabilities

Categorize items into assets, liabilities, owner's equity

Assets: Accounts receivable Goodwill Investments P,P,&E Liabilities: Wages Payable Notes Payable Long-term debt Owner's Equity: Retained Earnings Paid-in capital Salary Expense

Credits and Debits

Assets & Expenses: Debits increase Credits decrease Liabilities, Equity, Revenue: Credits increase Debits decrease

Assets

Cash Accounts, Notes, Interest Receivable Inventory Investments Fixed Assets Property, Plan, & Equipment (P,P,&E) Prepaid insurance Prepaid rent Other prepaid expenses Goodwill Intangible assets Deferred Tax Asset

Suppose on February 1, 2014 Bikram Yoga Natick collects $17 from a walk-in customer.

Cash (assets) debit $17 Revenue (Equity) credit $17

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on December 31, 2013 to record the payments received for these subscriptions?

Cash debit 120k Deferred Revenue credit 120k

Like A Wrecking Ball is a demolition company. At the end of a project, they presented their client with an invoice for $18,000 and immediately received a check for the full amount. What is the journal entry to record this receipt?

Cash debit 18k Revenue credit 18k

Cakery Bakery receives $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when they receive this payment?

Cash debit 1k Deferred Revenue 1k

Owner's Equity

Common stock Capital stock Additional Paid-In Capital Preferred Stock Treasury Stock Retained Earnings **Includes all revenue and expenses**

Expenses

Cost of Goods Sold Interest, Rent, Office, Travel, R&D, Depreciation Expenses

Notes Receivable increase with a: Debit/Credit

Debit Assets increase with a debit

Common stock decreases with a: Debit/Credit

Debit Owner's equity decreases with a debit

Which of the following accounts is increased by a credit? Inventory COGS Deferred Revenue Cash

Deferred Revenue

Cakery Bakery received $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when the cake is successfully delivered?

Deferred Revenue (Liability) debit 1k Revenue (Equity) credit 1k

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on January 31, 2014 related to the subscription services provided for one month?

Deferred Revenue debit 10k Revenue credit 10k

Curls Just Want to Have Fun, a small salon, purchased 200 wigs from their supplier for $25,000 and paid by check. What entry should the salon make to record this purchase?

Inventory debit 25k Cash credit 25k

On June 1, 2013 Cardullo's purchased a case of Vermeiren Cookie Spread as inventory from its supplier for $200 and paid in cash.

Inventory row 1, Debit $200 Cash row 2, credit $200

Billie's Beehives (BB) purchased a shipment of beehives on June 1, 2014 to sell to local beekeepers. It paid $500 for 100 hives.

Inventory row 1, Debit $500 Cash row 2, Credit $500

Supposed your company receives a large order from your best customer, Should this be treated as revenue and recorded on your company's books?

No, because revenue is not considered earned until a product or service is delivered. To recognize revenue, the company must have delivered the product or performed the service. Since this is just an order, it is not yet a transaction to be recorded. No service or product has been delivered yet, so no revenue is recognized.

Suppose on January 1, 2014 Cardullo's purchases a new cash register for the shop and pays $800.

P,P,&E (assets) debit $800 Cash (assets) credit $800

Dobby & Dumbledor's Candy Store (DDCS) receives 12 candy dispensers from Potter's Plastics to be installed for its grand opening on June 30. DDCS bought the dispensers for $2,000 each. DDCS is granted credit terms, which gives them 30 days to pay for the dispensers. What journal entry would be made at the time of the purchase?

PP&E debit 24k Accounts Payable credit 24k

Maria makes prepayments for online marketing services for her business through Constant Contact. Suppose she paid $360 on January 1, 2014 for six months of service.What would the journal entry look like to record this transaction?

Prepaid Expense debit $360 Cash credit $360

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchase $80,000 of open airline tickets in advance that can be used for a variety of destinations because they need the flexibility and savings provided by such tickets. What entry should Friends International make to record this purchase?

Prepaid Expense debit 80k Cash credit 80k

Revenues

Sales Sales, Interest, Rent Revenue Other Revenue

Which of the following accounts is decreased by a debit? Sales Revenue Rent Expense Deferred Revenue Interest Expense Prepaid Rent

Sales Revenue Deferred Revenue

Which of the following transactions below would cause the following journal entry? 09/01/14 Accounts Payable row 1, Debit $900 Cash row 2, Credit $900

The business pays a supplier for merchandise purchased on credit Accounts Payable is a liability, so it decreases with a debit, and Cash is an asset, so it decreases with a credit. This journal entry would be made when a business pays a supplier for merchandise purchased on credit, thus eliminating the liability previously incurred and decreasing cash by the amount paid.

Which of the following transactions below would cause the following journal entry? 09/01/14 Dividends Payable row 1, Debit $500k Cash row 2, Credit $500k

The business pays dividends to its shareholders The debit to Dividends Payable means the liability is decreasing, and the credit to Cash means the asset is decreasing. So this is an outflow of cash as the business pays dividends to its shareholders.

Which of the transactions below would cause the following journal entry? Accounts Receivable debit $10k Sales credit $10k COGS debit $7k Inventory $7k

The business sold inventory to a customer for $10,000. They had purchased the inventory for $7,000. The business sold inventory to a customer for $10,000. That is why there is a debit to Accounts Receivable and a credit to Sales for $10,000. They had purchased the inventory for $7,000. That is why there is a debit to Cost of Goods Sold and a credit to Inventory for $7,000.

Which of the following is TRUE regarding journal entries: - There are always only two accounts affected - The total amount debited must equal the total amount credited - Journal entries show debits on the right and credits on the left Journal entries show credits first, then debits

The total amount debited must equal the total amount credited

Suppose on June 1, 2013, Cardullo's sold 10 bags of MEM Tea for a total of $80 to a customer who paid in cash. The business had previously purchased the tea for $50 and recorded it as inventory. What is the journal entry related to the receipt of cash? What is the journal entry related to the delivery of inventory to the customer?

Time of sale: Cash debit $80 Sales (Revenue) credit $80 COGS (expenses) debit $50 Inventory credit $50

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchased $80,000 of open airline tickets in advance that can be used for a variety of destinations. Using the accrual method, build the entry to record the use of $40,000 of these tickets on March 15, 2014 for multiple passengers on a flight from New York to Kigali, Rwanda.

Travel Expense debit 40k Prepaid Expense credit 40k