Week 2 Study Guide 3 - Lecture notes 2 PDF

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This is a study guide for the week 2 lecture....

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Journalize entries: accounts, debits, and credits 

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Services provided but not recorded: o Debit: Accounts receivable o Credit: Service revenue Salaries earned by employees but not recorded: o Debit: Salaries expense o Credit: Salaries payable Accrued interest on a note payable: o Debit: interest expense o Credit: Interest payable Closing out revenue account: o Debit: service revenue o Credit: retained earnings Close out the expense account: o Debit: retained earnings o Credit: Salaries expense and rent expense Close out the dividends account: o Debit: retained earnings o Credit: dividends

Accrual accounting: Service revenue = collected cash from customers + owed service revenue

Account, type of account, permanent/temporary, and closed status:        

Supplies: Asset, Permanent, no (not closed) Depreciation expense: Expense, Temporary, Yes Sales revenue: Revenue, temporary, yes Building: Asset, permanent, no Cash: asset, permanent, no Unearned service revenue: liability, permanent, no Prepaid rent: Asset, permanent, no Dividends: stockholders’ equity, temporary, yes

Net income – dividends = Increase (decrease) in retained earnings

Statement of retained earnings:

The retained earnings of the business decreased due to net loss for the year and dividends paid. Prepare the business entity’s closing entries:

Closing out the revenue accounts:  

Debit: Service revenue: $98000 and Interest revenue $1100 Credit: Retained earnings: $99100

Close out expense accounts:  

Debit: Retained earnings = $32025 Credit: Salaries expense, depreciation expense, rent expense, interest expense, and supplies expense

Close out the dividends account:  

Debit: retained earnings Credit: Dividends = $15000

Retained earnings balance = credit RE – Debit RE + Data table RE = $62,675

Homework Guide Week 4: Determine pay after the discount period: 

Payment due after discount period = Cost of inventory – Purchase return

How much must the company pay the supplier company within the discount period? 

Payment due within discount period = Cost of inventory, net return – purchase discount

Journalize the transactions assuming the “net” method is utilized with debits and credits: 

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Purchase of goods: o Debit: Inventory o Credit: Accounts payable Return of the damaged goods: o Debit: Accounts payable o Credit: Inventory Payment for the goods within the discount period: o Debit: Accounts payable o Credit: Cash

On the terms 1/10, n/30 = 1% purchase discount (on payment due after discount period)

Goods purchased and paid for before discount date ends: terms 2/10 n/30 – account 2 is return of goods      

Debit 1: inventory (with discount calculated in) Credit 1: accounts payable Debit 2: accounts payable (taken away because goods were returned) Credit 2: inventory (increases because goods are undamaged) Debit 3: Accounts payable (because customer completed payment before discount date ends) Credit 3: cash

Journalize transactions using the “net” method with terms 3/15, n/30 

This means 3% due if paid within 15 days and the net is due in 30 days

Purchased inventory for $400 with terms 2/15 net 30  

Debit: ($400-2% * $400 = $392) for inventory Credit: for accounts payable

When paying for this purchase in full within the shorter time frame  

Debit: accounts payable Credit: cash

When a company is selling goods with credit terms 1/15 net 40.      

Sold 10 units with goods costing $21 each Customer pays $360 on account with terms Debit 1: Accounts receivable ($356.40) Credit 1: Sales revenue Debit 2: Cost of goods sold (10 units * $21 = $210) Credit 2: Inventory ($210)

When a customer returns goods – goods are not defective      

If 3 units are returned and customer has not paid, customer will have credits taken out of accounts receivable Make sure returns are not marked as less sold, they have their own category – Estimated refund liability Debit 1: Inventory (3 * $21 = $63) Credit 1: Estimated inventory returns Debit 2: Estimated refund liability Credit 2: Accounts receivable ([3/10] * $356.40 = 106.92)

When customer pays account in full, but after the discount date:    

Assume some previous inventory was returned Debit 1: Cash ($360 which is the total without discount * 7/10 which is the amount of inventory kept = $252) Credit 1: Accounts receivable ($356.40 which was what was previously listed as account credit $106.92 which is the discount on credit for returned goods = $249.48) Credit 2: Sales revenue (2.52 that the customer owes on balance for paying after discount date)...