Refer to the financial statements of The Home Depot in Appendix A at the end of this book.

Required:

1. How much did The Home Depot owe for salaries and related expenses at January 29, 2017? Was this an increase or decrease from the previous year?

a. $1,484 million (Decrease)
b. $1,484 million (Increase)
c. $7,000 million (Decrease)
d. $7,000 million (Increase)

2. Refer to the Revenues note in the Summary of Significant Accounting Policies that follows The Home Depot’s statements of cash flows. How does the company account for customer payments received in advance of providing services?

a. Record the prepayment as revenue.
b. The funds are deposited in the bank account and no entry is recorded.
c. The funds are not deposited in the bank account and no entry is recorded.
d. The revenue is deferred until the goods or services are provided to the customer.

3. What adjusting journal entry must The Home Depot make when it provides services paid by gift card?

a. Debit Cash, credit Deferred Revenue
b. Debit Deferred Revenue, credit Net Sales Revenue
c. Debit Net Sales Revenue, credit Deferred Revenue
d. Debit Deferred Revenue, credit Cash