ABC Corporation Mid-Term Exam Summary

Key Transactions of ABC Corporation in Fiscal 2020

• Issuance of Common Stock (Jan 1): $30,000 (Financing Activity)

• Equipment Purchase (Jan 1): $10,000 (Investing Activity). Estimated useful life: 5 years, salvage value: $2,000.

• Rent Payment (Apr 1): $3,600 for a year (operating expense).

• Bank Loan (Jul 1): $2,000 at 12% annual interest (Financing Activity).

• Merchandise Inventory Purchase (Aug 1): $3,600 on account (Operating Activity).

• Sales Revenue (Oct 1): Sold for $9,400, cost $2,300 (Operating Activity).

• Payment to Suppliers (Nov 1): $1,600 for previous inventory purchases.

• Cash Collection from Customers (Dec 1): $1,500 for October sales.

• Gift Card Sales (Dec 20): $1,000 cash received (Unearned Revenue).

• Gift Card Redemption (Dec 25): $400 redeemed, cost $220 (Recognized Revenue).

• Employee Wages Paid (Dec 31): $1,200 (Operating Expense).

Journal Entries and Adjustments

• Equipment Purchase Journal Entry (Jan 1):

  • Debit PP&E $10,000

  • Credit Cash $10,000

• Depreciation Adjusting Entry (Dec 31):

  • Debit Depreciation Expense $1,600

  • Credit Accumulated Depreciation $1,600

• Rent Journal Entry (Apr 1):

  • Debit Prepaid Rent $3,600

  • Credit Cash $3,600

• Rent Adjusting Entry (Dec 31):

  • Debit Rent Expense $2,700

  • Credit Prepaid Rent $2,700

• Bank Loan Journal Entry (Jul 1):

  • Debit Cash $2,000

  • Credit Long Term Debt $2,000

• Interest Adjusting Entry (Dec 31):

  • Debit Interest Expense $120

  • Credit Interest Payable $120

• Inventory Purchase Journal Entry (Aug 1):

  • Debit Inventory $3,600

  • Credit Accounts Payable $3,600

• Sales Journal Entry (Oct 1):

  • Debit Accounts Receivable $9,400

  • Credit Sales Revenue $9,400

• Cost of Goods Sold Journal Entry (Oct 1):

  • Debit Cost of Goods Sold $2,300

  • Credit Inventory $2,300

• Supplier Payment Journal Entry (Nov 1):

  • Debit Accounts Payable $1,600

  • Credit Cash $1,600

• Cash Collection Journal Entry (Dec 1):

  • Debit Cash $1,500

  • Credit Accounts Receivable $1,500

• Gift Card Sales Journal Entry (Dec 20):

  • Debit Cash $1,000

  • Credit Unearned Revenue $1,000

• Gift Card Redemption Journal Entry (Dec 25):

  • Debit Unearned Revenue $400

  • Credit Sales Revenue $400

  • Debit Cost of Goods Sold $220

  • Credit Inventory $220

• Wage Payment Journal Entry (Dec 31):

  • Debit Wage Expense $1,200

  • Credit Cash $1,200

Closing Entries as of Dec 31

• Closing Entry for Revenues:

  • Debit Sales Revenue $9,400

  • Credit Retained Earnings $9,400

• Closing Entry for Expenses:

  • Credit Retained Earnings for Total Expenses: (Sum: $7,920)

  • Include Interest Expense, Wage Expense, Cost of Goods Sold, Rent Expense, Depreciation Expense.

Balance Sheet Highlights (Dec 31, 2020)

• Total Assets: Calculate net PP&E (after depreciation) and total assets from selected accounts (Cash, Receivables, Inventories).

• Liabilities: Accounts Payable, Long Term Debt calculated based on transactions.

• Retained Earnings: Adjusted reflecting net income and closures from transactions.