Lecture 02 - Cases (Reporting Process A)

Question 1

Journalize and Post: Issue Stock

On May 1, investors contributed $10,000 cash to start Jana Juice which sells energy drinks to retailers and individuals, in exchange for 500 shares of stock.

Answer 1

Account Debit:

Cash(+A) - This represents the cash received from investors.

Account Credit:

Common Stock (+ SE) - This records the par value or stated value of the shares issued. Common stock typically doesn’t have a specific dollar amount and is recorded at a nominal value per share.

Question 2

Journalize and Post: Obtain Loan

On May 1, Jana Juice borrowed $4,000 cash by signing a note to be repaid on May 31 plus interest of $40.

Answer 2

Account Debit:

Cash (+A) - This represents the cash received from the loan.

Account Credit:

Notes Payable (+L) - This represents the liability for the borrowed amount.

Question 3

Journalize and Post: Rental Agreement

Jana Juice signed a rental agreement for its store location and paid $1,800 as a security deposit.

Answer 3

• Account Debit: Prepaid Rent (or Security Deposit) - This represents the security deposit paid in advance for the rental agreement.
• Account Credit: Cash (or Bank) - This records the cash outflow for the security deposit.

Question 4

Journalize and Post: Purchase Inventory

Jana Juice purchased $2,000 of inventory on account, consisting of energy drinks.

Answer 4

Create a journal entry on the date of the inventory purchase.

• Debit the Inventory account for the cost of the inventory acquired.
• Credit the Accounts Payable (or Cash, if paid immediately) account to record the liability for the amount owed to the supplier.

Question 5

Journalize and Post: Purchase Inventory

Jana Juice purchased $2,000 of inventory on account, consisting of energy drinks.

Answer 5

Create a journal entry to record the inventory purchase.

• Debit the Inventory account to reflect the cost of the inventory items acquired.
• Credit the Accounts Payable (if purchased on credit) or Cash (if paid immediately) account to record the liability or cash payment associated with the purchase.

Question 6

Journalize and Post: Payment of Advertising

Jana Juice paid $900 to advertise in the local newspaper during May.

Answer 6

Account Debit:
Advertising Expense (+E, -SE) - This represents the cost of the advertising services or materials.

Account Credit:
Cash (-A) - This records the cash outflow for the payment of advertising expenses.

Question 7

Journalize and Post: Pay Amounts Due

Jana Juice paid $1,500 for inventory previously purchased on account

Answer 7

• Account Debit: Accounts Payable (or specific liability accounts if applicable) - This represents the reduction in the amounts you owe to creditors or suppliers.
• Account Credit: Cash (or Bank) - This records the cash outflow for the payment of the amounts due.

Question 8

Journalize and Post: Sell to Customers for Cash

Jana Juice sold $600 of energy drinks to customers for $2,400 cash during
May.

Answer 8

• Account Debit: Cash (or Bank) - This represents the increase in cash from the sale.
• Account Credit: Sales Revenue - This records the revenue generated from the sale.

Question 9

Journalize and Post: Sell to Customers on Account

Jana Juice sold $700 of energy drinks on account for $2,900 to a convenience store during May.

Answer 9

• Account Debit: Accounts Receivable - This represents the amount receivable from the customer for the sale (the amount they owe you).
• Account Credit: Sales Revenue - This records the revenue generated from the sale.

Question 10

Journalize and Post: Pay Wages

Jana Juice paid wages totaling $1,300 to employees during May.

Answer 10

Account Debit:

• Wages Expense (+E) - This represents the cost of wages paid to employees.

Account Credit:

• Cash (-A) - This records the cash outflow for the payment of wages.

Question 11

Journalize and Post: Sold Membership

During May, Jana Juice received $300 from customers in exchange for a three month membership (June, July and August) to an online health program.

Answer 11

Account Debit:

Cash (+A) - This represents the cash received from selling the membership.

Account Credit:

Unearned Revenue (+L) - This records the revenue generated from the sale of the membership.

Question 12

Journalize and Post: Customer Collections

Jana Juice collected $1,200 of the amount owed by customers during May.

Answer 12

• Account Debit: Cash (or Bank) - This represents the increase in cash or bank balance due to the payment received from customers.
• Account Credit: Accounts Receivable - This reduces the amount owed by customers and represents the amount collected.

Question 13

Journalize and Post: Paid Principal and Interest

Jana Juice paid $40 for interest and repaid the $4,000 note payable.

Answer 13

• Account Debit: Interest Expense - This represents the cost of interest paid.
• Account Debit: Loan Payable (or the specific loan account) - This reduces the outstanding loan balance and represents the payment toward the principal.
• Account Credit: Cash (or Bank) - This records the cash outflow for the payment.

Question 14

Journalize and Post: Paid for Insurance in Advance

Jana Juice paid $800 for a four-month insurance policy

Answer 14

• Account Debit: Prepaid Insurance (or Prepaid Expenses) - This represents the prepayment made for future insurance coverage.
• Account Credit: Cash (or Bank) - This records the cash outflow for the payment.

Question 15

Journalize and Post: Paid Rent Jana Juice paid $700 for rent for May.

Answer 15

Account Debit: Rent Expense - This represents the cost of renting the property.
Account Credit: Cash (or Bank) - This records the cash outflow for the rent payment.

Question 16

Journalize and Post: Paid Dividends

Jana Juice paid $400 for dividends to shareholders during May.

Answer 16

• Account Debit: Retained Earnings - This represents the reduction in retained earnings, as dividends are paid out of accumulated earnings.
• Account Credit: Cash (or Bank) - This records the cash outflow for the dividend payment.