The following activities occurred in 2011: Billed customers for advertising serv

Question

The following activities occurred in 2011:

Billed customers for advertising services rendered, $55,000.

Received cash from customers in payment of their accounts, $10,400.

Incurred $45,000 of operating expenses of which $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.

Paid suppliers $5,000 on the accounts payable.

Received deposits from customers of $2,500 for advertising services to be performed in 2012.

Which of the following is the journal entry to record activity #4?

a. Operating Expense 5,000 Cash 5,000 b. Accounts Payable 5,000 Cash 5,000 c. Accounts Payable 5,000 Operating Expense 5,000 d. Cash 5,000 Accounts Payable 5,000

Explanation / Answer

The correct answer is

This is because when the Suppliers are Paid $ 5,000 in cash, there is an outflowof cash and a decrease in the axcounts payable.

Cash being an asset, a decrease / outflow is credited and accounts payable being a liability, a decrease is debited.

b. Accounts Payable 5,000 Cash 5,000

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