Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the Connect library.

Required:
1. How much did The Home Depot owe for salaries and related expenses at February 2, 2014? Was this an increase or decrease from the previous year?

a. $1,428 million (Increase)
b. $1,428 million (Decrease)
c. $5,797 million (Decrease)
d. $5,797 million (Increase)

2. Refer to the Revenues note in the Summary of Significant Accounting Policies that follows The Home Depot’s statements of cash flows. How does the company account for customer payments received in advance of providing services?

a. Record the prepayment as revenue.
b. The funds are deposited in the bank account and no entry is recorded.
c. The funds are not deposited in the bank account and no entry is recorded.
d. The revenue is deferred until the goods or services are provided to the customer.

3. What adjusting journal entry must The Home Depot make when it provides services paid by gift card?

a. debit Cash, credit Unearned Revenue
b. debit Unearned Revenue, credit Service Revenue
c. debit Service Revenue, credit Unearned Revenue
d. debit Unearned Revenue, credit Cash

Data From Appendix A: