Dr or Cr?
On June 1, Miller Consulting provides $2,500 of consulting services to a client. The client pays the full amount immediately in cash. Record the entry for Miller Consulting.
Debit: Cash ($2,500)
Assets increase with a debit.
Credit: Service Revenue ($2,500)
Revenue increases with a credit.
A company has Total Assets of $150,000 and Total Equity of $60,000. What is the missing value for Total Liabilities?
What is $90,000? ($150,000 - $60,000)
A student loan has a balance of $8,000 and an annual interest rate of 6%. If the monthly payment is $150, how much of that payment goes toward reducing the principal balance in the first month?
What is $110? (Interest: $8,000 × 0.06 / 12 = $40. Principal: $150 - $40 = $110).
Accumulated Depreciation is a specific type of account that sits on the Asset side of the equation but has a normal credit balance, effectively reducing the value of the asset it is paired with.
What is a Contra-Asset?
A machine costs $10,000, has a $2,000 salvage value, and a 4-year useful life. Using straight-line, this is the annual depreciation expense.
What is $2,000? ($8,000 / 4 years)
On June 5, Miller Consulting purchases $800 of supplies and a $3,000 computer(equipment). The company pays $1,000 in cash and puts the remaining balance on account. Record the compound entry.
Debit: Supplies ($800)
Debit: Equipment ($3,000)
Credit: Cash ($1,000)
Credit: Accounts Payable ($2,800)
Total debits ($3,800) must equal total credits ($3,800).
Current Assets consist of Cash ($5,000), Accounts Receivable (?), and Supplies ($2,000). If Total Current Assets are $15,000, what is the value of Accounts Receivable?
What is $8,000? ($15,000 - $5,000 - $2,000)
A company borrows $10,000 to be repaid in 10 monthly installments of $1,050 each. What is the total amount of Interest Expense the company will record over the entire life of the loan?
What is $500?
(Total payments: $1,050 × 10 = $10,500. Total Principal: $10,000. $10,500 - $10,000 = $500).
These two types of accounts reside under the "Equity" umbrella but have opposite effects: one increases it through earnings, and the other decreases it by distributing profits to owners.
What are Revenue and Dividends?
If an asset has a 5-year useful life, this is the fixed percentage rate used every year under the double-declining balance method.
What is 40%?
(Straight-line rate is 1/5 or 20%; double that is 40%).
On June 10, a client pays Miller Consulting $6,000 in advance for a six-month service contract that begins in July. No work was performed in June. Record the entry for the receipt of payment.
Debit: Cash ($6,000)
Credit: Deferred Revenue ($6,000)
Deferred Revenue is a liability because the company owes the service to the client.
Beginning Retained Earnings were $20,000. After a Net Income of $8,000, the Ending Retained Earnings are $25,000. How much was paid out in Dividends?
What is $3,000? ($20,000 + $8,000 - $25,000)
A franchise agreement was purchased for $100,000 with a 5-year useful life. After 36 months have passed, what is the Carrying Value (Book Value) of the franchise on the Balance Sheet?
What is $40,000? (Annual amortization is $20,000. 36 months = 3 years. $100,000 - [$20,000 × 3] = $40,000)
A company purchases a new delivery truck for $20,000 in cash. This is the net effect on the "Total Assets" side of the equation
What is Zero (or No Effect)? (One asset, Equipment, increases by $20k while another asset, Cash, decreases by $20k)
A truck costs $30,000 with a $5,000 salvage value and is expected to drive 100,000 miles. What is the depreciation cost per mile?
What is $0.25 per mile? ($25,000 / 100,000 miles)
On June 15, Miller Consulting receives a check for $1,200 from a customer who was billed last month for services previously rendered. Record the entry for the collection of this payment.
Debit: Cash ($1,200)
Credit: Accounts Receivable ($1,200)
You are increasing one asset (Cash) and decreasing another (Accounts Receivable) because the customer no longer owes that specific balance.
At year-end, Total Assets are $200,000 and Total Liabilities are $120,000. If Common Stock is $50,000, what is the missing value for Retained Earnings?
What is $30,000?
(Total Equity is $80,000; $80,000 - $50,000 stock = $30,000 RE)
A $10,000 loan has a 12% annual interest rate and monthly payments of $500. After the first month's payment ($100 interest, $400 principal), what is the interest expense for the second month?
What is $96? (New balance is $9,600. $9,600 × 0.12 / 12 months = $96)
A company performs $2,000 of work for a client "on account." Name the two specific categories in the accounting equation that increase.
What are Assets (Accounts Receivable) and Equity (Service Revenue)?
A computer system costs $10,000 (0 salvage value) with a 4-year life. Using Double-Declining Balance, what is the depreciation expense for Year 2?
What is $2,500? (Year 1: $10,000 × 50% = $5,000. Year 2: Remaining $5,000 book value × 50% = $2,500).
On June 30, Miller Consulting’s accountants realize that employees have earned $4,500 in wages for the last week of June, but they will not be paid until the first Friday in July. Record the necessary adjusting entry on June 30.
Debit: Salaries and Wages Expense ($4,500)
Credit: Salaries and Wages Payable ($4,500)
This follows the matching principle: the expense must be recorded in the period the work was performed, even if the cash hasn't left the bank yet.
After a $1,000 account was previously written off, the customer unexpectedly pays the full amount in cash. These are the two separate entries required to record this event. (Account titles and Dr/Cr)
1. What is a Debit to Accounts Receivable and a Credit to Allowance for Uncollectible Accounts (to reverse the write-off)?
2. What is a Debit to Cash and a Credit to Accounts Receivable (to record the payment)?
On an amortization schedule, if the beginning balance is $10,000, the annual interest rate is 12%, and payments are made monthly, this is the interest expense for the very first month
What is $100? ($10,000 × 0.12 = $1,200 per year; $1,200 ÷ 12 months = $100).
A company borrows $50,000 from a bank by signing a note. Immediately after this transaction, the debt-to-assets ratio increases. Name the two equation components that grew.
What are Assets (Cash) and Liabilities (Notes Payable)?
A machine with a Cost of $50,000 and Accumulated Depreciation of $42,000 is sold for $10,000 cash. What is the amount of the Gain on Disposal?
What is $2,000? (Book Value is $8,000. Cash received $10,000 - $8,000 BV = $2,000 Gain).