Exercise 3 - ACCOUNTING Exercise 3 American Airlines 1...

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1 ACCOUNTING Exercise 3 American Airlines
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2 ECONOMIC EVENTS 1. Issue 1,000,000 shares of common stock. Par value is $5 per share. Selling price is $10 per share. 2. Acquire 5 aircraft from Boeing at $200,000,000 each. The bank pays for the aircraft. We sign a ten year, 10% Note Payable with the bank. 3. Pay $3,000,000 for route authorities. 4. Receive $200,000,000 cash from customers for flight reservations. 5. Pay $20,000,000 for salaries. 6. Pay $20,000,000 for jet fuel used on flights. 7. Accrue $1,000,000 estimated cost to provide future free flights under Frequent Flyer Rewards Program. 8. 90% of the flights from #4 above take place. 9. Loan $500,000 to a major supplier strapped for cash. Five year term, 10% interest rate. 10. End of year. Record one year depreciation on the aircraft (20 year lives). 11. End of year. Accrue one year interest on Note Receivable. 12. End of year. Accrue one year interest on the Notes Payable. 13. End of year. Accrue $2,000,000 for unpaid salaries. 14. Transfer 12,950,000 Net Income to Retained Earnings.
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3 JOURNAL ENTRIES 1. 2. 3. 4. 5.
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4 JOURNAL ENTRIES 6. 7. 8. 9. 10.
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5 JOURNAL ENTRIES 11. 12. 13. 14. 15.
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6 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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7 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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8 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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9 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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10 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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11 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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12 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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13 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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14 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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15 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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16 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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17 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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18 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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19 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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20 _________________ A/C Reference Transaction Current Balance Debit Credit Debit Credit
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