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Chapter 3: Q2E (page 129)

E3-2 (L02) (Corrected Trial Balance) The following trial balance of Wanda Landowska Company does not balance. Yourreview of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance,Accounts Payable, and Property Tax Expense were each understated \(100. (c) A transposition error was made in AccountsReceivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are \)2,750 and \(6,690,respectively. (d) A debit posting to Advertising Expense of \)300 was omitted. (e) A \(1,500 cash drawing by the owner was debited to Owner’s Capital and credited to Cash.

WANDA LANDOWSKA COMPANYTRIAL BALANCEAPRIL 30, 2017

Debit (\)) Credit (\()Cash \) 4,800Accounts Receivable 2,570Prepaid Insurance 700Equipment \( 8,000Accounts Payable 4,500Property Taxes Payable 560Owner’s Capital 11,200Service Revenue 6,960Salaries and Wages Expense 4,200Advertising Expense 1,100Property Tax Expense 800

Total \)20,890 $24,500

Prepare a correct trial balance.

Short Answer

Expert verified

The total corrected trial balance is 24,350.

Step by step solution

01

Step 1:Meaning of Trial Balance

The trial balanceis aworksheet in which all the ledger balances are recordedand divided into debit and credit columns. Debit and credit totals should be equal at the end of the reporting period.

02

Preparation of trial balance

Wanda Landowska Company

Trail balance

April 30, 2017

Particulars

Debit $

Credit $

Cash

4,800

Accounts receivable

2750

Prepaid insurance($700 + $100)

800

Equipment

8,000

Owners drawings

1500

Salaries and wage expenses

4200

Advertising expenses($1100 + $300)

1400

Property tax expense ($800 + $100)

$900

Accounts payable ($4500 - $100)

4400

Property tax payable

560

Owners capital ($11,200+$1,500)

12700

Service revenue

6690

Total

24,350

24,350

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Most popular questions from this chapter

Which statement is correct regarding IFRS?

(a) IFRS reverses the rules of debits and credits, that is,debits are on the right and credits are on the left.

(b) IFRS uses the same process for recording transactionsas GAAP.

(c) The chart of accounts under IFRS is different becauserevenues follow assets.

(d) None of the above statements are correct.

BE3-3 (L02,3) On July 1, 2017, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.

A review of the ledger of Baylor Company at December 31, 2017, produces the following data pertaining to the preparation of annual adjusting entries.

  1. Salaries and Wages Payable \(0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive \)700 each per week, and three employees earn \(600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.

  2. Unearned Rent Revenue \)429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a \(5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.

    Date

    Term (in months)

    Monthly Rent

    Number of Leases

    Nov. 1

    6

    \)6,000

    5

    Dec. 1

    6

    \(8,500

    4

  3. Prepaid Advertising \)13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below.

    Contract

    Due date

    Amount

    Number of magazine issue

    A650

    May 1

    \(6,000

    12

    B974

    Oct. 1

    7,200

    24

    The first advertisement runs in the month in which the contract is signed

  4. Notes Payable \)60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1.

    Instructions

    Prepare the adjusting entries at December 31, 2017. (Show all computations).

Mason Advertising was founded in January 2013. Presented below are adjusted and unadjusted trial balances as of December 31, 2017.


MASON ADVERTISINGTRIAL BALANCEDECEMBER 31, 2017


UnadjustedAdjusted

Dr.

Cr.

Dr.

Cr.

Cash

\( 11,000

\) 11,000

Accounts Receivable

20,000

23,500

Supplies

8,400

3,000

Prepaid Insurance

3,350

2,500

Equipment

60,000

60,000

Accumulated Depreciation—Equipment

\( 28,000

\) 33,000

Accounts Payable

5,000

5,000

Interest Payable

–0–

150

Notes Payable

5,000

5,000

Unearned Service Revenue

7,000

5,600

Salaries and Wages Payable

–0–

1,300

Common Stock

10,000

10,000

Retained Earnings

3,500

3,500

Service Revenue

58,600

63,500

Salaries and Wages Expense

10,000

11,300

Insurance Expense

850

Interest Expense

350

500

Depreciation Expense

5,000

Supplies Expense

5,400

Rent Expense

4,000

4,000

\(117,100

\)117,100

\(127,050

\)127,050

Instructions

  1. Journalize the annual adjusting entries that were made. (Omit explanations.)
  2. Prepare an income statement and a statement of retained earnings for the year ending December 31, 2017, and an unclassified balance sheet at December 31.
  3. Answer the following questions.
    1. If the note has been outstanding 3 months, what is the annual interest rate on that note?
    2. If the company paid $12,500 in salaries and wages in 2017, what was the balance in Salaries and Wages Payable on December 31, 2016?
See all solutions

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