Swifty Corporation showed the following balances at the end of its first year: Cash = $8,360 Prepaid insurance = 380

Question

Swifty Corporation showed the following balances at the end of its first year: Cash = $8,360 Prepaid insurance = 380 Accounts receivable = $1,900 Accounts payable = $1,520 Notes payable = $2,280 Common stock = $3,800 Dividends = 380 Revenues = 16,720 Expenses = 9,500 What amount did Swifty Corporation show as total credits? a. $24,320 b. $25,080 c. $24,700 d. $23,940

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Answer: a. $24,320 Cash = $8,360 Cash is an asset account and the normal balance is debit Prepaid insurance = 380 Prepaid insurance is an asset account and the normal balance is debit Accounts receivable = $1,900 Account receivable is an asset account and the normal balance is debit Accounts payable = $1,520 Account payable is a liability account and the normal balance is credit Notes payable = $2,280 Notes payable is a liability account and the normal balance is credit Common stock = $3,800 Common stock is an equity account and the normal balance is credit Dividends = 380 Dividends are deduction to equity accounts which is why it is debited Revenues = 16,720 Revenue accounts should be credited Expenses = 9,500 Expense accounts should be debited Based on the explanation above, total credits is computed as follows: Account Amount Accounts payable $1,520 Notes payable 2,280 Common stock 3,800 Revenues 16,720 Total $24,320

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Archived Solution

Cash = $8,360	Cash is an asset account and the normal balance is debit
Prepaid insurance = 380	Prepaid insurance is an asset account and the normal balance is debit
Accounts receivable = $1,900	Account receivable is an asset account and the normal balance is debit
Accounts payable = $1,520	Account payable is a liability account and the normal balance is credit
Notes payable = $2,280	Notes payable is a liability account and the normal balance is credit
Common stock = $3,800	Common stock is an equity account and the normal balance is credit
Dividends = 380	Dividends are deduction to equity accounts which is why it is debited
Revenues = 16,720	Revenue accounts should be credited
Expenses = 9,500	Expense accounts should be debited

Account	Amount
Accounts payable	$1,520
Notes payable	2,280
Common stock	3,800
Revenues	16,720
Total	$24,320