Intermediate Exam 1: Fundamentals of Accounting

Journal Entries

The Hammer Company makes a $3000 cash purchase of toolboxes, which will be used in the hammer manufacturing process for years to come.

Debit Equipment (PP&E) and Credit Cash $3000

The Hammer company makes a $4000 cash purchase of toolboxes, which will be sold to customers.

Debit Merchandise Inventory and Credit Cash $4000

The Hammer company pays $2000 in rent for a warehouse

Debit Rent Expense and Credit Cash $2000

The Hammer company pays a worker $500 for cleaning the company warehouse using cash

Debit Wage Expense and Credit Cash $500

The hammer company pays $1300 worth of steel ingots for the manufacturing of hammers (Using Cash)

Debit Raw Materials Inventory and Credit cash $1300

The Hammer company pays $1300 worth of steel ingots for the manufacturing of hammers (on account)

Debit Raw materials inventory and credit A/P $1300

The hammer company recognizes its workers completed $4800 of labor on the third week of January. They will be paid at the end of the month.

Debit Wages Expense and Credit Wages Payable $4800

The Hammer company “clears its payroll” or “pays out all its accrued wages” on the 31st of January. Its workers completed $10,000 of labor in this most recent pay periods

Debit Wages Payable and Credit cash $10,000

The Hammer company refurbishes a customer’s toolbox (as a service) for $100 that is paid by the customer in cash

Debit Cash Credit Sales Revenue for $100

The Hammer company sells $800 worth of hammers that cost $500 to produce to a distributor that pays cash

Debit Cash Credit Sales Revenue for $800, Debit COGS Credit Inventory for $500

The Hammer company sells hammers that cost $200 to produce to a customer for $300 who pays on account.

Debit COGS Credit Inventory for $200, Debit A/R Credit Sales revenue for $300

The Hammer company receives payment from a customer who previously bought $300 of hammers on account

Debit Cash Credit A/R $300

The Hammer company agrees to sell hammers to a customer at a price of $600, who pre-pays

Debit Cash Credit Deferred Revenue $600

The Hammer company delivers hammers, that cost $400, to a customer who previosuly paid in cash the sales price of $600

Debit COGS Credit Inventory $400, Debit Deferred Revenue Credit Sales Receivale $600

Hammer company purchases a forklift for $20,000, paid in cash

Debit Equipment Credit Cash $20,000

Hammer company purchases a forklift for $21,000 paid for on account

Debit equipment Credit A/P $21,000

Hammer company pays an invoice (for the forklift) at the end of the month for $21,000 with cash

Debit A/P Credit Cash $21,000

Hammer Company purchases a forklift for $22,000. It is paid for using a 6-month note.

Debit Equipment, Credit Notes Payable (Current Debt) $22,000

Hammer company purchases a forklift for $23,000. It is paid for using an 18-month note.

Debit Equipment, Credit Long-term Notes payable $23,000

Hammer company purchases a crane for $20,000. It is paid for using a 9 month interest bearing note

Debit Equipment Credit Notes Payable Short term $20,000

After 9 months, the company pays off the $20,000 note along with $5000 in interest using cash

Debit Notes Payable 20,000 Debit Interest Payable 5,000 Credit Cash 25,000

The Hammer company purchases a forklift for $24,000. It is paid for using 4 equal principle payments of $6,000 every 6-months (zero-interest)

Debit PP&E 24,000, Credit Notes Payable Short Term 12,000 Credit Notes Payable Long term 12,000

Hammer company buys a hammer-making machine for 10,000 using cash

Debit Equipment Credit Cash 10,000

Hammer company recognizes its hammer-making machine has depreciated by $1,000 in the last year

Debit Depreciation expense, Credit Accumulated Depreciartion 1,000

Hammer company disposes of its hammer-making machine at the end of its useful life. Its value at cost was $10,000 and it has depreciated to a book value of $0

Debit Accumulated Depreciation Credit PP&E $10,000

Hammer company finds a buyer that pays $500 for the fully depreciated hammer-making machine

Debit Cash Credit Gains $500

The Hammer company issues 100 common shares (no par value) to an investor who contributes $10,000

Debit Cash Credit Contributed Capital $10,000

Hammer company pays out a dividend to each of its 90,000 shares outstanding in the amount of 10 cents

Debit Retained Earnings/Dividends Credit Cash $9,000