Chapter 3

Question 1

Sold shares of common stock for $2 million to start the business

Answer 1

Cash(A) is Increasing, Common Stock (SE) is Increasing

Question 2

Borrowed $800k from a bank by signing a note due in 3 years

Answer 2

Cash is Increasing, Notes Payable (Liability) is Increasing

Question 3

Purchased $550k of equipment

Answer 3

Equipment(A) is increasing, Cash(A) is decreasing
0 dollar net impact

Question 3

7(a) Sold merchandise for $100k cash and $400k ON ACCOUNT

Answer 3

Cash(A) is increasing, Accounts Receivable(A) is increasing, Sales Revenue(SE) is increasing

Question 3

Paid one year in advance for rent, total amount prepaid was $300k

Answer 3

Prepaid rent(A) is increasing, cash(A) is decreasing
0 dollar net impact

Question 4

Purchased Inventory costing $950k

Answer 4

Inventory is increasing, cash is decreasing
0 net impact

Question 4

Purchased $27,000 of supplies ON ACCOUNT

Answer 4

Supplies is increasing, Accounts Payable(L) is increasing

Question 5

7(b) Cost of Merchandise sold was $375k

Answer 5

Cost of Goods Sold is increasing(SE), Inventory is decreasing

Question 6

Received $100k cash IN ADVANCE from customers for future classes

Answer 6

Cash is increasing, Deferred Revenue(L) is increasing

Question 7

Paid employees Dec. salaries of $42,000

Answer 7

Salaries Expense(SE) is decreasing, Cash is decreasing

Question 8

Paid cash dividends to stockholders of $19,000

Answer 8

Dividends(SE) are decreasing, cash is decreasing

Question 9

Credits are always on the

Answer 9

RIGHT side

Question 9

Debits are always on the

Answer 9

LEFT side

Question 10

Credits INCREASES..

Answer 10

Liabilities, Owners Equity, Revenues

Question 10

Debits INCREASES..

Answer 10

Dividends, Expenses, Assets

Question 11

Sold shares of common stock for $2 million to start the business
(Debit/Credit)

Answer 11

Cash is increasing = Debit
Common Stock is increasing = Credit

Question 12

Borrowed $800k from bank by signing a note due in 3 years
(Debit/Credit)

Answer 12

Cash is increasing= Debit
Notes Payable is increasing = Credit

Question 13

Purchased $27,000 of supplies ON ACCOUNT
(Debit/Credit)

Answer 13

Supplies is increasing = Debit
Accounts Payable is increasing = Credit

Question 13

Paid one year in advance for rent
(Debit/Credit)

Answer 13

Prepaid Rent is increasing = Debit
Cash is decreasing = Credit

Question 13

Purchased $550k of equipment
(Debit/Credit)

Answer 13

Cash is decreasing = Credit
Equipment is increasing = Debit

Question 14

Purchased inventory costing $950k
(Debit/Credit)

Answer 14

Cash is decreasing = Credit
Inventory is increasing = Debit

Question 15

7(a) Sold merchandise for $100k cash and $400k ON ACCOUNT
(Debit/Credit)

Answer 15

Cash is increasing = Debit
Accounts Receievable is increasing = Debit
Sales Revenue is increasing = Credit

Question 16

7(b) Cost of merchandise sold was $375k
(Debit/Credit)

Answer 16

Cost of Goods Sold is increasing = Debit
Inventory is decreasing = Credit

Question 17

Received $100k cash in advance from customers for future classes
(Debit/Credit)

Answer 17

Deferred Revenue is increasing = Credit
Cash is increasing = Debit

Question 18

Paid employees Jan. salries of $42,000
(Debit/Credit)

Answer 18

Salaries Expense is icnreasing = Debit
Cash is decreasing = Credit

Question 19

Paid cash dividends to shareholders of $19,000
(Debit/Credit)

Answer 19

Dividends is increasing = Debit
Cash is decreasing = Credit

Question 20

In a journal entry, there are always…

Answer 20

At least 2 accounts and one debit and one credit

Question 21

Debits must…

Answer 21

ALWAYS EQUAL Credits