Correcting errors in a trial balance

The trial balance of Love to Learn Child Caredoes not balance.

Account Title Debit Credit

Office Supplies 1,000

Cash 8,060

Accounts Receivable 8,700

Prepaid Insurance 1,700

Equipment 90,400

Accounts Payable 3,000

Notes Payable 45,000

Common Stock 54,000

Dividends 3,740

Service Revenue 16,300

Rent Expense 400

Salaries Expense 4,350

Total Balance \( 118,350 \) 118,300

The following errors are detected:

a. Cash is understated by \(1,800.

b. A \)3,800 debit to Accounts Receivable was posted as a credit.

c. A \(1,000 purchase of office supplies on account was neither journalized nor posted.

d. Equipment was incorrectly transferred from the ledger as \)90,400. It should have been transferred as \(82,500.

e. Salaries Expense is overstated by \)350.

f. A \(300 cash payment for advertising expense was neither journalized nor posted.

g. A \)160 cash dividend was incorrectly journalized as \(1,600.

h. Service Revenue was understated by \)4,000.

i. A 12-month insurance policy was posted as a $1,400 credit to Prepaid Insurance. Cash was posted correctly.

Prepare the corrected trial balance as of May 31, 2018. Journal entries are not required.

Step by step solution

01

Definition of salary expense

The salary expense is defined as the cost incurred that the business incurs to compensate the company's employees.

02

Preparation of corrected Trial Balance

Love To Learn Child Care
Corrected Trial Balance
May 31, 2018
Account Title	Calculations	Debit ($)	Credit ($)
Cash	8,060+1,800-300+1,440	$11,000
Accounts Receivables	8,700+7,600	$16,300
Office Supplies	1,000+1,000	$2,000
Prepaid Insurance	1,700+2,800	$4,500
Equipment		$82,500
Accounts Payable	3,000+1,000		$4,000
Notes Payable			$45,000
Common Stock			$54,000
Dividends	3,740-1,440	$2,300
Service Revenue	16,300+4,000		$20,300
Salaries Expense	4,350-350	$4,000
Rent Expense		$400
Advertising Expense		$300
Total		$123,300	$123,300

03

Computation of correction

$$\begin{gathered} \mathbf{Cash}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Understated}\mathbf{-}\mathbf{Advertisingexpense}\mathbf{+}\mathbf{Dividends} \\ \mathbf{=}\mathbf{8}\mathbf{,}\mathbf{060}\mathbf{+}\mathbf{1}\mathbf{,}\mathbf{800}\mathbf{-}\mathbf{300}\mathbf{+}\mathbf{1}\mathbf{,}\mathbf{440} \\ \mathbf{=}\mathbf{11}\mathbf{,}\mathbf{000} \end{gathered}$$

$$\begin{gathered} \mathbf{AccountsReceivables}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{8}\mathbf{,}\mathbf{700}\mathbf{+}\mathbf{7}\mathbf{,}\mathbf{600} \\ \mathbf{=}\mathbf{\$}\mathbf{16}\mathbf{,}\mathbf{300} \end{gathered}$$

$$\begin{gathered} \mathbf{OfficeSupplies}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{1}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{1}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{000} \end{gathered}$$

$$\begin{gathered} \mathbf{PrepaidInsurance}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{1}\mathbf{,}\mathbf{700}\mathbf{+}\mathbf{2}\mathbf{,}\mathbf{800} \\ \mathbf{=}\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{500} \end{gathered}$$

$$\begin{gathered} \mathbf{AccountsPayable}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{1}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{000} \end{gathered}$$

$$\begin{gathered} \mathbf{Dividends}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{740}\mathbf{-}\mathbf{1}\mathbf{,}\mathbf{440} \\ \mathbf{=}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{300} \end{gathered}$$

$$\begin{gathered} \mathbf{ServiceRevenue}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{16}\mathbf{,}\mathbf{300}\mathbf{+}\mathbf{4}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{20}\mathbf{,}\mathbf{300} \end{gathered}$$

$$\begin{gathered} \mathbf{RentExpense}\mathbf{=}\mathbf{OriginalAmount}\mathbf{+}\mathbf{Correctionentry} \\ \mathbf{=}\mathbf{4}\mathbf{,}\mathbf{350}\mathbf{-}\mathbf{350} \\ \mathbf{=}\mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{000} \end{gathered}$$

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!