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195. At
year-end, Harris Cleaning Service noted the following errors in its trial
balance:
It understated the total debits to the Cash account by $500 when computing the account balance.
1. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting
debit was not posted.
2. A cash payment to a creditor for $2,600 was never recorded.
3. The $680 balance of the Prepaid Insurance account was listed in the credit column of the
trial balance.
4. A $24,900 truck purchase for cash was recorded as a $24,090 debit to Vehicles and a
$24,090 credit to Notes Payable.
5. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The
offsetting credit entry was correct.
6. An additional investment of $4,000 by Del Harris was recorded as a debit to Common
Stock and as a credit to Cash.
7. The cash payment of the $510 utility bill for December was recorded (but not paid) twice.
8. A revenue account balance of $79,817 was listed on the trial balance as $97,817.
9. A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash.
Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance and whether a correcting journal entry is required.
It understated the total debits to the Cash account by $500 when computing the account balance.
1. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting
debit was not posted.
2. A cash payment to a creditor for $2,600 was never recorded.
3. The $680 balance of the Prepaid Insurance account was listed in the credit column of the
trial balance.
4. A $24,900 truck purchase for cash was recorded as a $24,090 debit to Vehicles and a
$24,090 credit to Notes Payable.
5. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The
offsetting credit entry was correct.
6. An additional investment of $4,000 by Del Harris was recorded as a debit to Common
Stock and as a credit to Cash.
7. The cash payment of the $510 utility bill for December was recorded (but not paid) twice.
8. A revenue account balance of $79,817 was listed on the trial balance as $97,817.
9. A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash.
Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance and whether a correcting journal entry is required.
|
|
Would the error cause the trial balance to be out of balance?
|
|
Correcting Journal Entry Required
|
||
|
Error
|
Yes
|
No
|
Amount of Imbalance
|
Yes
|
No
|
|
1.
|
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2.
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3.
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4.
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5.
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6.
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7.
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8.
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9.
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10.
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Answer:
|
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Would the error cause the trial balance to be out of balance?
|
|
Correcting Journal Entry Required
|
||
|
Error
|
Yes
|
No
|
Amount of Imbalance
|
Yes
|
No
|
|
1
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X
|
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$500
|
|
X
|
|
2.
|
X
|
|
311
|
|
X
|
|
3.
|
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X
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0
|
X
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4.
|
X
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1,360
|
|
X
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5.
|
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X
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0
|
X
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6.
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X
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0
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X
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7.
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X
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0
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X
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8.
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X
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0
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X
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9.
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X
|
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18,000
|
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X
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10.
|
|
X
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0
|
X
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|
Bloom’s
Taxonomy: Analyze
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Decision Making
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Hard
Learning Objective: 02-P2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Decision Making
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Hard
Learning Objective: 02-P2
[Question]
196. The
following trial balance was prepared from the general ledger of Hal's Auto
Repair.
|
HAL’S AUTO REPAIR
Trial Balance
October 31
|
||
|
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Debit
|
Credit
|
|
Cash
|
$ 975
|
|
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Accounts
receivable
|
3,800
|
|
|
Supplies
|
500
|
|
|
Repair
equipment
|
13,000
|
|
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Office
equipment
|
6,600
|
|
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Accounts
payable
|
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$ 4,510
|
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Common
stock
|
|
10,000
|
|
Retained
earnings
|
|
13,000
|
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Dividends
|
4,200
|
|
|
Repair
fees earned
|
|
10,875
|
|
Supplies
expense
|
8,600
|
|
|
Totals
|
$37,675
|
$38,385
|
Since the trial balance did not balance, you decided to examine the accounting records. You found that the following errors had been made:
1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit
to Accounts Payable.
2. An investment of $500 cash by the owner was debited to Common Stock and credited to
Cash.
3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted
from the computation.
4. One debit of $300 to the Dividends account was posted as a credit.
5. Office equipment purchased for $800 was posted to the Repair Equipment account.
6. One entire entry was not posted to the general ledger. The transaction involved the receipt
of $125 cash at the time repair services were performed.
Prepare a corrected trial balance for the Hal's Auto Repair as of October 31.
Answer:
|
HAL’S AUTO REPAIR
Trial Balance
October 31
|
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|
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Debit
|
Credit
|
|
Casha
|
$ 2,100
|
|
|
Accounts
receivableb
|
4,400
|
|
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Supplies
|
500
|
|
|
Repair
equipmentc
|
12,200
|
|
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Office
equipmentd
|
7,400
|
|
|
Accounts
payablee
|
|
$ 5,000
|
|
Common
stockf
|
|
11,000
|
|
Retained
earnings
|
|
13,000
|
|
Dividendsg
|
4,800
|
|
|
Repair
fees earnedh
|
|
11,000
|
|
Supplies
expense
|
8,600
|
|
|
Totals
|
$40,000
|
$40,000
|
a. Cash: Balance $975 + $1,000 (2) + 125 (6) = $2,100
b. Accounts Receivable: Bal. $3,800 + 600 (3) = $4,400
c. Repair Equipment: Bal. $13,000 - 800 (5) = $12,200
d. Office Equipment: Bal. $6,600 + 800 (5) = $7,400
e. Accounts Payable: Bal $4,510 + 490 (1) = $5,000
f. Common Stock = Bal. $10,000 + 1,000 (2) = $11,000
g. Dividends: Bal. $4,200 + 600 (4) = $4,800
h. Repair fees earned: Bal $10,875 + 125 (6) = $11,000
Bloom’s
Taxonomy: Create
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Hard
Learning Objective: 02-P2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Hard
Learning Objective: 02-P2
[Question]
197. The following are all of the
accounts of Flaherty Company that have a balance at the end of August. All
accounts have normal balances:
|
Accounts
receivable
|
$36,000
|
Cash
|
$27,000
|
|
Equipment
|
59,000
|
Advertising
expense
|
5,000
|
|
Service
revenues earned
|
75,000
|
Accounts
payable
|
31,000
|
|
Rent
expense
|
3,600
|
Dividends
|
24,000
|
|
Office
supplies
|
1,500
|
Salaries
expense
|
30,000
|
|
Notes
payable
|
22,000
|
Common
stock
|
20,000
|
|
|
|
Retained
earnings
|
58,100
|
a. Calculate net income
b. Determine the amount of retained earnings to be shown on the August 31 balance sheet.
Answer:
a.
|
$75,000
|
|
Service
revenues earned
|
|
(3,600)
|
|
Rent
expense
|
|
(5,000)
|
|
Advertising
expense
|
|
(30,000)
|
|
Salaries
expense
|
|
$36,400
|
|
Net
income
|
b.
|
$58,100
|
|
Retained
earnings (beginning)
|
|
36,400
|
|
Net
income
|
|
(24,000)
|
|
Dividends
|
|
$70,500
|
|
Retained
earnings
|
Bloom’s
Taxonomy: Analyze
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-P3
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-P3
[Question]
198. Based
on the following trial balance for Sal's Beauty Shop, prepare an income
statement, statement of retained earnings and a balance sheet. Sal made no
additional investments in the company during the year.
|
Sal’s Beauty Shop
Trial Balance
December 31
|
||
|
Cash
|
$ 6,500
|
|
|
Accounts
receivable
|
475
|
|
|
Beauty
supplies
|
2,500
|
|
|
Beauty
shop equipment
|
17,000
|
|
|
Accounts
payable
|
|
$ 745
|
|
Common
stock
|
|
10,000
|
|
Retained
earnings
|
|
11,155
|
|
Dividends
|
36,000
|
|
|
Revenue
earned
|
|
72,000
|
|
Beauty
supplies expense
|
3,425
|
|
|
Rent
expense
|
6,000
|
|
|
Wages
expense
|
22,000
|
|
|
Totals
|
$93,900
|
$93,900
|
Answer:
|
Sal’s Beauty Shop
Income Statement
For the year ended December 31
|
||
|
Revenue
earned
|
|
$72,000
|
|
Expenses:
|
|
|
|
Beauty supplies expense
|
$ 3,425
|
|
|
Rent expense
|
6,000
|
|
|
Wages expense
|
22,000
|
|
|
Total expenses
|
|
31,425
|
|
Net
Income
|
|
$40,575
|
|
Sal’s Beauty Shop
Statement of Retained Earnings
For the year ended December 31
|
|
|
Retained
earnings, January 1
|
$11,155
|
|
Add:
Net income
|
40,575
|
|
Less:
Dividends
|
(36,000)
|
|
Retained
earnings, December 31
|
$15,730
|
|
Sal’s Beauty Shop
Balance Sheet
At December 31
|
|||
|
Assets
|
Liabilities
|
||
|
Cash
|
$ 6,500
|
Accounts
payable
|
$ 745
|
|
Accounts
receivable
|
475
|
|
|
|
Beauty
supplies
|
2,500
|
Equity
|
|
|
Beauty
shop equipment
|
17,000
|
Common
stock
|
$10,000
|
|
|
|
Retained
earnings
|
15,730
|
|
|
|
Total
equity
|
25,730
|
|
Total
assets
|
$26,475
|
Total
liabilities and equity
|
$26,475
|
|
|
|
|
|
Bloom’s
Taxonomy: Create
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-P3
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-P3
Fill in the Blank Questions
[Question]
199. ____________________________
and _____________________ are the starting points for the analyzing and
recording process.
Answer: Business transactions; events
Answer: Business transactions; events
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
[Question]
200. The
second step in the analyzing and recording process is to record the
transactions and events in the _____________________________.
Answer: Journal
Answer: Journal
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
[Question]
201. The
third step in the analyzing and recording process is to post the information to
_________________________.
Answer: Ledger accounts.
Answer: Ledger accounts.
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C1
[Question]
202. _________________
identify and describe transactions and events and provide objective evidence
and amounts for recording.
Answer: Source documents
Answer: Source documents
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
[Question]
203. Revenues
and expenses are two categories of ____________________ accounts.
Answer: Equity
Answer: Equity
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
[Question]
204. The
_______________________ is a record containing all accounts (with balances)
used by a company.
Answer: General ledger (or ledger)
Answer: General ledger (or ledger)
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
[Question]
205. The
three general categories of accounts in a general ledger are
__________________, _________________ and __________________________.
Answer: Assets, liabilities, equity
Answer: Assets, liabilities, equity
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
[Question]
206. ___________________
is a promise of payment from customers to sellers.
Answer: Accounts receivable
Answer: Accounts receivable
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: 02-C2
[Question]
207. Unearned
revenue is classified as _______________ that is satisfied by delivering
products or services in the future.
Answer: A Liability
Answer: A Liability
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
[Question]
208. The
four categories of equity accounts are _____________________,
__________________, ______________________ and ______________________.
Answer: Common stock; dividends; revenues; expenses
Answer: Common stock; dividends; revenues; expenses
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C2
[Question]
209. A
_______________ is a list of all the accounts used by a company and their
identification codes.
Answer: Chart of accounts
Answer: Chart of accounts
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C3
[Question]
210. A
___________________ is a record containing all accounts for a company along
with their balances.
Answer: Ledger
Answer: Ledger
Bloom’s
Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C4
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: 02-C4
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