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Chapter 2: Q14RQ (page 90)
What is the purpose of the trial balance?
Trial balance is an accounting worksheet, and the primary purpose is to examine the accuracy of the accounts.
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Identify which types of accounts have a normal debit balance and which types of accounts have a normal credit balance.
Question:Courtney Meehan has trouble keeping her debits and credits equal. During a recent month, Courtney made the following accounting errors:
a. In preparing the trial balance, Courtney omitted a \(5,000 Notes Payable. The debit to Cash was correct.
b. Courtney posted a \)1,000 Utilities Expense as \(100. The credit to Cash was correct.
c. In recording a \)600 payment on account, Courtney debited Furniture instead of Accounts Payable.
d. In journalizing a receipt of cash for service revenue, Courtney debited Cash for \(50 instead of the correct amount of \)500. The credit was correct.
e. Courtney recorded a \(210 purchase of office supplies on account by debiting Office Supplies for \)120 and crediting Accounts Payable for \(120.
Requirements 2. Identify each account that has an incorrect balance and the amount and direction of the error (e.g., “Accounts Receivable \)500 too high”).
Question:E2-21 Journalizing transactions from T-accounts In December 2018, the first five transactions of Abling’s Lawn Care Company have been posted to the T-accounts. Prepare the journal entries that served as the sources for the five transactions. Include an explanation for each entry
Cash
Question:The following transactions occurred for Lawrence Engineering:
Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock.
4 Paid utilities expense of \)370.
5 Purchased equipment on account, \(1,600.
10 Performed services for a client on account, \)2,900.
12 Borrowed \(7,100 cash, signing a notes payable.
19 Cash dividends of \)200 were paid to stockholders.
21 Purchased office supplies for $840 and paid cash.
27 Paid the liability from July 5.
Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.
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.
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