Mock Exam 3 (focus on book entries) Flashcards
A company purchases equipment for €50,000 and pays by bank transfer immediately. What are the cash flow and book entry impacts?
Cash in-/outflow ?
Income/ Expense ?
Book entry ?
Cash flow: Outflow
Income/Expense: No impact (capital expenditure, not an expense - it’s PPE!)
Book-entry:
Dr. PPE €50,000
Cr. Bank €50,000
The company pays its employees €60,000 in wages and €12,000 in social security contributions via bank transfer. What are the cash flow and book entry impacts?
Cash in-/outflow ?
Income/ Expense ?
Book entry ?
Cash flow: Outflow
Income/Expense: Expense
Book-entry:
Dr. Wages Expense €60,000
Dr. Social Security Expense €12,000
Cr. Bank €72,000
A company sells equipment for €30,000, and the carrying value of the equipment is €5,000. The buyer agrees to pay in 60 days. What are the cash flow and book entry impacts?
Cash in-/outflow ?
Income/ Expense ?
Book entry ?
Cash flow: No immediate impact (payment deferred)
Income/Expense: Gain on sale of €25,000
Book-entry:
Dr. Accounts Receivable €30,000
Cr. Equipment €5,000
Cr. Gain on Sale of Equipment €25,000
A company is required to pay a legal claim of €40,000. It had previously recognized a provision of €30,000. What are the cash flow and book entry impacts?
Cash in-/outflow ?
Income/ Expense ?
Book entry ?
Cash flow: Outflow
Income/Expense: Expense (€10,000 additional)
Dr provision 30k (liability account decreased/ right hand side = debit)
Dr other expense 10k (reduces equity/ right hand side = debit)
Cr bank 40k
A customer goes bankrupt, and the company writes off an account receivable of €25,000. What are the cash flow and book entry impacts?
Cash flow: No impact
Income/Expense: Expense! (bad debt write-off)
Dr. allowance for bad debts 25k (decreases a liability)
Cr. accs receivable 25k
At year-end, employees are entitled to €5,000 in vacation pay for unused time. How should this be recorded?
Cash flow: No immediate impact (future outflow)
Income/Expense: Expense (recognize at year-end)
Dr. Labor Costs Expense €5,000
Cr. Vacation Pay Provision €5,000
