PART 1:

Please indicate whether a debit or credit is needed to increase and decrease account and whether it is a balance sheet or income statement account.

Account	Increase	Decrease	BS or IS
Example: Cash	Debit	Credit	Balance Sheet
Wages Payable
Prepaid Insurance
Depreciation Expense
Accumulated Depreciation
Interest Expense
Prepaid Insurance
Notes Payable
Treasury Stock
Preferred Stock
Unearned Revenues
Warranty Expense
Sales
Retained Earnings
Deferred Tax Asset
Income Tax Payable

PART 2:

Please indicate the appropriate journal entry for each transaction listed below for Comet Company.

Comet sold $540,000 of goods for $440,000 cash and $100,000 accounts receivable. Cost of goods sold was $210,000.

Account	DR	CR

Comet incurred administrative expenses of $100,000 and paid for these with cash. They also incurred wages expense of $80,000 to which they paid $76,000 in cash and will pay $4,000 in January of next year.

Account	DR	CR

Comet purchased a $100,000 building. They financed $80,000 with a long-term loan and issued $20,000 in common stock.

Account	DR	CR

Depreciation Expense for the year is $40,000.

Account	DR	CR

Comet estimates 1% of sales ($540,000) will be uncollectible.

Account	DR	CR

Comet purchased $220,000 of inventory during the year. $200,000 Cash and $20,000 A/P

Account	DR	CR

Comet received $3,000 Cash for products to be delivered next year.

Account	DR	CR

Comet accrued interest on the $80,000 note payable from the earlier transaction. The interest rate is 9% and 5 months of time has passed since issuing the note.

Account	DR	CR

Comet has a one-year warranty on its products. Comet estimates that 2% of sales ($540,000) would be returned for warranty repairs.

Account	DR	CR

Comet issued 10,000 shares of $1 par value common stock for $8 per share.

Account	DR	CR

Comet reacquired 500 shares of common stock at $6 per share.

Account	DR	CR