Homegoods Corporation HC maker of Sonya paper products decid

Homegoods Corporation (HC), maker of Sonya paper products, decided to hold a managers\' meeting in Hawaii in April. To take advantage of special fares, HC purchased airline tickets in advance from Air True Airlines at a total cost of $68,000. These were acquired on October 1 for cash. Requirements 1. By using the balance sheet equation format, analyze the impact of the October payment and the April travel on the financial position of both HC and Air True. 2. Also prepare journal entries for April for both companies. Requirement 1. By using the balance sheet equation format, analyze the impact of the October payment and the April travel on the financial position of both HC and Air True. (Use parentheses or a minus sign to show a decrease in the accounting equation component. Leave any unused cells blank.) Enter the transactions into the equation one transaction at a time, beginning with the October payment on the books of HC first. Assets Liabilities Stockholders\' Equity Prepaid Travel ExpenseSales Revenue Unearned Sales Travel Cash Revenue Expense October payment April travel Next, enter the transactions into the equation on the books of Air True Airlines, beginning with the October payment.

Solution

Requirement 1 (HC) Cash Prepaid Travel expenses = Unearned sales revenue Sales Revenue Travel Expenses October payment $                                   (68,000) $         68,000 April Travel $       (68,000) $      68,000 Requirement 1 (Air True) Cash Prepaid Travel expenses = Unearned sales revenue Sales Revenue Travel Expenses October payment $                                     68,000 $         68,000 April Travel $      (68,000) $      68,000 Requirement 2 (HC) Date Accounts Debit Credit Travel Expenses $         68,000 Prepaid Travel expenses $      68,000 Requirement 2 (Air True) Date Accounts Debit Credit Unearned sales revenue $         68,000 Sales Revenue $      68,000