Question

9:19 ..1 LTE O 15-34 Customer and Airline Suppose Macy's decided to hold a managers' meeting in Honolulu in February. To take advantage of special fares, Macy's purchased airline tickets in advance from Delta Airlines at a total cost of $55,000. Macy's acquired the tickets on December 1 for cash. Using the balance-sheet-equation format, analyze the impact of the December payment and the February travel on the financial position of both Macy's and Delta. Only evaluate the transactions for Macy's. What 2 postings are needed for December, and what 2 postings are needed for February?

Answer 1

Solution:

2 Posting needed in december :

Purchase of advance ticket results in increase in prepaid expenses and decrease in cash. Therefore prepaid expenses are debited and cash is credited. This will result no change in assets in balance sheet equation as one asset is increasing and other is decreasing with same amount.

2 Posting needed in February :

As travel is completed in february, therefore expense is booked in February by debiting travel expense and crediting prepaid expenses. This will result in decrease in assets and decrease in stockholder's equity in balance sheet equation.