FA Module 2
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?
- debit Cash (an asset) for $9,000 as the company now has the cash - credit Accounts Receivable (also an asset) for $9,000 as the company no longer has the right to receive cash.
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.
- The correct answer is to debit Travel Expense for $40,000 to recognize the expense associated with the use of the tickets - credit Prepaid Expense for $40,000 as the company no longer has the right to receive benefits from the prepaid tickets.
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?
- debit Cash for $120,000 as the company now has the cash - credit Deferred Revenue for $120,000 as the company now has the obligation to provide services in the future.
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?
- debit Cash for $18,000 as the company now has the cash (remember--checks are considered cash!) - credit Revenue for $18,000 to recognize the revenue associated with the services provided.
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?
- debit Cost of Goods Sold for $7,000 to recognize the expense associated with the sale of shoes - credit Inventory for $7,000 as the company no longer has the inventory.
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?
- debit Deferred Revenue (a liability) for $1,000 as the company no longer has an obligation to provide services - credit Revenue (part of owners' equity) for $1,000 to recognize the revenue associated with the sale.
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?
- debit Deferred Revenue for $10,000 as the company no longer has the liability for one month's worth of subscription - credit Revenue for $10,000 to recognize the revenue associated with one month's worth of services provided.
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?
- debit Inventory for $25,000 as the company now has the inventory (the wigs), - credit Cash for $25,000 as the company paid with cash (remember checks are considered cash in accounting terms).
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?
- debit Prepaid Expense for $80,000 as the company now has the right to receive benefits from the prepaid tickets - credit Cash for $80,000 as the company no longer has the cash.
UDeliver, a moving rental truck company, paid $3,600 on 1/1/2016 for 12 months of insurance coverage on a fleet of trucks for the coming year. What would be the impact on this date? What would be the impact on March 31, 2016 when UDeliver makes an adjustment to reflect that three months of the insurance coverage has been used up?
1/1 INSURANCE EXPENSE: $3600 increase with debit CASH: $3600 decrease with credit 3/31 ACCOUNTS PAYABLE: Insurance Expense (part of owners' equity) increases with a debit of $900 Prepaid Insurance (an asset) decreases with a credit of $900.
Gill Fishing, a company that provides fishing expeditions for tourists at 8 locations across the globe, sold 15 tickets for expeditions at its various locations on January 1, 2015 for a total of $15,000 ($1,000 per customer). The customers will go on the expeditions during the fishing months from May - September 2015. All of the customers paid in cash at the time of the purchase. What impact would the receipt of cash have on this date? By July 31, 2015, Gill had provided eight of the fifteen expeditions. What would be the impact when Gill Fishing records the services provided for the month?
1/1/15 CASH: $15000 increase with a debit DEFERRED REVENUE: $15000 increase with credit 7/31/15 REVENUE: $8000 increase with credit DEFERRED REVENUE: $8000 decrease with debit
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: $9000 increase with debit REVENUE: $9000 increase with credit
Which of the following accounts increase with a debit? Select all that apply.
Cash Depreciation Expense Prepaid Rent
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?
Cash (asset) increases with a debit of $2100 and since the revenue has not been earned and Bikram Yoga Natick is obligated to provide the yoga classes, the DEFERRED REVENUE account (a liability) should be increased (credited) by the amount of funds received ($2,100). On July 31, reduce (debit) the Deferred Revenue account (a liability) for $700 and increase (credit) the Revenue account (part of owners' equity) for $700, one-third of the initial advance.
Suppose on June 30, 2013 Cardullo's received an electricity bill for $900 and paid it immediately. How would you record this transaction on a T-account?
Cash is an asset account and it is decreased by credits (on the right in T-accounts). Utility Expense is an expense account and it is increased by debits (on the left in T-accounts).
Suppose on February 1, 2014 Bikram Yoga Natick collects $17 from a walk-in customer. How would you record this transaction on a T-account?
Cash is an asset and increases with a debit of $17. Revenue is part of owners' equity and increases with a credit $17.
Which of the following is an expense account? Select all that apply.
Cost of Goods Sold Rent Expense Wages Expense
On June 1, 2013 Cardullo's purchased a case of Vermeiren Cookie Spread as inventory from its supplier for $200 and paid in cash. How would you record the following transaction?
Debit Inventory for $200 Credit Cash for $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. How would you record the following transaction?
Debit Inventory for $500 Credit Cash for $500
On January 1, 2015 Sweetums, a candy manufacturer, sold 15 boxes of their signature chocolate bars to a local retailer for $1,500. Sweetums had paid $720 to produce the chocolate bars. Sweetum's granted credit terms and permitted the retailer to pay in 30 days. On the same day of the sale, Sweetums delivered the chocolate bars to the retail store. Consider both the revenue and cost of this transaction on the books of Sweetums. What would be the impact on January 1, 2015, the date of the sale? On January 30, 2015 Sweetums received payment in full from the local retailer.What would be the impact of this transaction on this date?
January 1st REVENUE: $1500 increase with credit COST OF GOODS SOLD: $1500 increase with credit ACCOUNTS RECEIVABLE: $1500 increase with debit INVENTORY: $720 decrease with credit COST OF GOODS SOLD: $720 increase with debit January 30th CASH: $1500 increase with debit ACCOUNTS RECEIVABLE: $1500 decrease with credit
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?
On January 1, 2014, Prepaid Insurance (an asset) increases with a debit of $2,400 and Cash (an asset) decreases with a credit of $2,400. On January 31, 2014, Insurance Expense (part of owners' equity) increases with a debit of $200 and Prepaid Insurance (an asset) decreases with a credit of $200.
Suppose on January 1, 2014 Cardullo's purchases a new cash register for the shop and pays $800. How would you record this transaction on a T-account?
Property, Plant, & Equipment (P,P&E) is an asset and increases with a debit of $800. Cash is also an asset and decreases with a credit of $800.
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?
REVENUR BOOK!! - debit Accounts Receivable for $16,000 as the company now has the right to receive cash -credit Revenue for $16,000 to recognize the revenue associated with the sale.
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?
To record the purchase on 9/1/13: Debit Inventory for $100 Credit Accounts Payable for $100 To record the payment 30 days later: Debit Accounts Payable for $100 Credit Cash for $100
Kopera is a small family-owned office supply store. Suppose on September 1, 2015 Kopera purchased a large order of notebooks from a supplier for $850. Kopera has 30 days to pay the supplier. What would the journal entry for this purchase look like? 30 days later, Kopera paid for the notebooks.What would the journal entry for the payment made on September 30, 2015 look like?
To record the purchase on 9/1/15: Debit Inventory for $850 Credit Accounts Payable for $850 To record the payment 30 days later: Debit Accounts Payable for $850 Credit Cash for $850
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. First record the sale and then the impact on Cardullo's inventory.
To record the sale, Cash (an asset) increases with a debit of $80 and Sales (revenue) increases with a credit of $80. At the same time, Cost of Goods Sold or COGS (expense) increases with a debit of $50 and Inventory (an asset) decreases with a credit of $50.
