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Chapter 2: 11RQ (page 90)
Explain the five steps in journalizing and posting transactions.
Journal is the record of business transactions and there are five steps to journalizing and posting journal entries.
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Correcting errors in a trial balance
The trial balance of Beautiful Tots Child Care does not balance.
Account Title Debit Credit
Office Supplies 1,000
Cash 7,900
Accounts Receivable 6,700
Prepaid Insurance 300
Equipment 91,500
Accounts Payable 3,400
Notes Payable 45,000
Common Stock 57,000
Dividends 5,000
Service Revenue 12,350
Rent Expense 750
Salaries Expense 4,400
Total Balance \( 117,550 \) 117,750
The following errors are detected:
a. Cash is understated by \(1,500.
b. A \)4,100 debit to Accounts Receivable was posted as a credit.
c. A \(1,400 purchase of office supplies on account was neither journalized nor posted.
d. Equipment was incorrectly transferred from the ledger as \)91,500. It should have been transferred as \(83,000.
e. Salaries Expense is overstated by \)700.
f. A \(300 cash payment for advertising expense was neither journalized nor posted.
g. A \)200 cash dividend was incorrectly journalized as \(2,000.
h. Service Revenue was understated by \)4,100.
i. A 12-month insurance policy was posted as a $1,900 credit to Prepaid Insurance. Cash was posted correctly.
Prepare the corrected trial balance as of August 31, 2018. Journal entries are not required.
Question:Preparing a trial balance from T-accounts
The T-accounts of McMahon Farm Equipment Repair follow as of May 31, 2018.
ASSETS Salaries Payable LIABILITIES EQUITY Retained Earnings 4,000 29,000 Notes Payable 3,500 400 Accounts Receivable 14,000 Land 29,000 Building 16,000 Equipment Common Stock Contributed Capital Dividends Property Tax Expense 1,000 Advertising Expense 280
Cash 31,000 1,800 400 14,000 4,200 800 4,000 2,000 3,380
Service Revenue 3,500 1,800 4,200 31,000 2
Calculating the balance of a T-account
Accounts Payable
May 2 6,000 21,000 May 1
May 22 11,500 500 May 5
8,500 May 15
500 May 23
Calculate the Accounts Payable balance.
Journalizing transactions and posting to T-accounts
Roland Foster Optical Dispensary completed the following transactions during the latter part of March:
Mar. 15 Purchased office supplies on account, \(3,400.
28 Paid \)1,800 on account.
Requirements ,
2. Open the following accounts (use T-account format): Cash (Beginning Balance of $21,000), Office Supplies, and Accounts Payable. Post the journal entries from Requirement 1 to the accounts, and compute the balance in each account.
Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson鈥檚 presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.
What is the ethical issue in this situation, if any?
State why you approve or disapprove of Henson鈥檚 management of Better Days Ahead鈥檚 funds.
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