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3. Patel Limited discovered the following errors in its records: a. An amount of $5,000 paid to a supplier in payment of an Accounts Payable. It was incorrectly posted as a $5,000 debit to Accounts Receivable. b. Interest income of $1,650 received from a bank was incorrectly credited to interest expense. c. Purchase of office supplies costing $8,200 was debited to office equipment. Part 1: What are the journal entries to correct the errors? Part 2: If the above errors are not corrected, what is the impact to the following: o Assets o Liabilities o Shareholders' equity O Retained Earnings O Net Income o Revenue o Expenses

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Hubert Koch
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21 Jul 2018

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On March 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Potomac Realty:

a.The supplies account balance on March 31 is $5,620, the supplies on hand on March 31 are $1,290.

b.The unearned rent account balance on March 31 is $5,000 representing the receipt of an advance payment on March 1 of four months’ rent from tenants.

c.Wages accrued but not paid at March 31 are $2,290

d.Fees accrued but unbilled on March 31 are $16,825.

e.Depreciation of office equipment is $4,600.

CHART OF ACCOUNTS

Potomac RealtyGeneral Ledger
  ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
15 Land
16 Equipment
17 Accumulated Depreciation-Office Equipment
19 Accumulated Depreciation-Automobiles
   
  LIABILITIES
21 Accounts Payable
22 Unearned Rent
23 Wages Payable
24 Taxes Payable
   
  EQUITY
31 Owner, Capital
32 Owner, Drawing
   
  REVENUE
41 Fees Earned
42 Rent Revenue
   
  EXPENSES
51 Advertising Expense
52 Insurance Expense
53 Rent Expense
54 Wages Expense
55 Supplies Expense
56 Utility Expense
57 Depreciation Expense
59 Miscellaneous Expense
 

Required:

  
1.  Journalize the adjusting entries required on March 31. Refer to the Chart of Accounts for the exact wording of account titles.
2.  What is the difference between adjusting entries and correcting entries?
  A) Both adjusting entries and correcting entries are a planned part of the accounting process.
  B) Adjusting entries are a planned part of the accounting process, correcting entries are not planned but arise when necessary to correct errors.
  C) Both adjusting entries and correcting entries are not a planned part of the accounting process.
  D) Correcting entries are a planned part of the accounting process, adjusting entries are not planned but arise when necessary to adjust errors.

 

PART ONE: The accounts in the ledger of Hickory FurnitureCompany as of December 31, 2016, are listed in alphabetical orderas follows. All accounts have normal balances. The balance of thecash account has been intentionally omitted. I AMMISSING CASH (DEBIT) and Debit TOTAL---only

Accounts Payable $ 42,880

Notes Payable $ 41,000

Accounts Receivable 115,430

Prepaid Insurance 20,400

Cash ?

Rent Expense 45,000

Common Stock 15,000

Retained Earnings 51,000

Dividends 22,500

Supplies 4,940

Fees Earned 746,050

Supplies Expense 6,070

Insurance Expense 3,100

Unearned Rent 13,200

Land 41,000

Utilities Expense 26,840

Miscellaneous Expense 9,900

Wages Expense 572,100

Prepare an unadjusted trial balance and insert the missingfigure for cash.

Hickory FurnitureCompany
UNADJUSTED TRIAL BALANCE
Score: 68/75
December 31,2016
ACCOUNT TITLE DEBIT CREDIT
1
Cash
2
Accounts Receivable
✔
3
Supplies
4
Prepaid insurance
✔
5
Land
✔
6
Accounts Payable
✔
7
Unearned Rent
✔
8
Notes Payable
✔
9
Common Stock
✔
10
Retained Earnings
✔
11
Dividends
✔
12
Fees Earned
✔
13
Wages Expense
✔
14
Rent Expense
✔
15
Utilities Expense
✔
16
Supplies Expense
✔
17
Insurance Expense
✔
18
Miscellaneous Expense
✔
19
Totals
✔

PART TWO:

On July 24, it was discovered that the following errors tookplace in journalizing and posting transactions:

a. Cash of $8,100 received on accountwas recorded as a debit to Fees Earned and a credit to Cash.
b. A $1,560 purchase of supplies forcash was recorded as a debit to Supplies Expense and a credit toAccounts Payable.

Journalize the entries on July 24 to correct the errors. Use twotransactions to correct the error described in b. (That is, recordan entry to reverse the incorrect entry and a second entry torecord the correct entry.) Refer to the Chart of Accounts for exactwording of account titles.

JOURNAL
DATE DESCRIPTION POST. REF. DEBIT CREDIT
1
XXXX
2
3
4
5
XXXX
XXX
6
XXXX
7
XXXX
CHARTOF ACCOUNTS
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Rent
15 Land
16 Office Equipment
17 Automobiles
LIABILITIES
21 Accounts Payable
22 Salaries Payable
23 Notes Payable
EQUITY
31 Common Stock
32 Retained Earnings
33 Dividends
REVENUE
41 Fees Earned
EXPENSES
51 Advertising Expense
52 Automobile Expense
53 Insurance Expense
54 Rent Expense
55 Salaries Expense
56 Supplies Expense
57 Utilities Expense
58 Miscellaneous Expense

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. Cash balance according to the company’s records at August 31, $18,257.
2. Cash balance according to the bank statement at August 31, $27,261.
3. Checks outstanding, $14,624.
4. Deposit in transit, not recorded by bank, $6,131.
5. A check for $58 in payment of an account was erroneously recorded in the check register as $580.
6. Bank debit memo for service charges, $11.

Journalize the entry or entries that should be made by the company. Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
Creative Design Co.
General Ledger
ASSETS
110 Cash
111 Petty Cash
120 Accounts Receivable
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
146 Store Supplies
151 Prepaid Insurance
181 Land
191 Office Equipment
192 Accumulated Depreciation-Office Equipment
193 Store Equipment
194 Accumulated Depreciation-Store Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
222 Interest Payable
231 Salaries Payable
241 Sales Tax Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
313 Income Summary
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Merchandise Sold
515 Credit Card Expense
516 Cash Short and Over
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Insurance Expense
534 Office Supplies Expense
535 Rent Expense
536 Repairs Expense
537 Selling Expenses
538 Store Supplies Expense
561 Depreciation Expense-Office Equipment
562 Depreciation Expense-Store Equipment
590 Miscellaneous Expense
710 Interest Expense

Journal

Journalize the entry or entries that should be made by the company. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

2

3

4

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