Azure Enterprises follows a manual accounting system. During the current fiscal year, it bought a car for $30,390. The accountant of Azure correctly journalized the transaction but wrongly entered the amount as $30,930. To make a correction of this error, the accountant should:

Azure Enterprises follows a manual accounting system. During the current fiscal year, it bought a car for $30,390. The accountant of Azure correctly journalized the transaction but wrongly entered the amount as $30,930. To make a correction of this error, the accountant should:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Azure Enterprises follows a manual accounting system. During the current fiscal year, it bought a car for $30,390. The accountant of Azure correctly journalized the transaction but wrongly entered the amount as $30,930. To make a correction of this error, the accountant should: a.draw a single line through the amount $30,930 and record the correct amount $30,390 above it. b.reverse the original entry and record the correct entry. c.erase the amount of $30,930 and record the correct amount of $30,390 in the same place. d.cross the amount of $30,930 and record the correct amount of $30,390 below it.
Jetson Corp. performed services for a customer worth $500 and the customer will pay for those services next month. When the transaction was journalized, however, Jetson's accountant debited the "Cash" account and credited the "Service Revenue" account for $500 each. Question: As a result of this error, which of the following statements is/are true? (check all that apply) Select one or more: a. Total debits and total credits will still equal but the balance sheet equation will not be satisfied. b. Total debits and total credits will still equal and the balance sheet equation will be satisfied. c. The "Accounts Receivable" account balance will be too low (understated) while the "Cash" account balance will be too high (overstated). d. The "Accounts Receivable" account balance will be too low (understated) while the "Service Revenue" account balance will be too high (overstated).
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Tunstall, Inc.Unadjusted Trial Balancefor the Year Ended December 31 Debit Credit Cash 46,500 Accounts receivable 11,900 Supplies 440 Prepaid insurance 670 Service trucks 16,200 Accumulated depreciation 7,900 Other assets 9,560 Accounts payable 2,280 Wages payable Income taxes payable Notes payable, long-term 12,000 Common stock (4,900 shares outstanding) 1,936 Additional paid-in capital 17,424 Retained earnings 5,800 Service revenue 87,320 Wages expense 16,200 Remaining expenses(not detailed; excludes income…
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Tunstall, Inc.Unadjusted Trial Balancefor the Year Ended December 31 Debit Credit Cash 46,800 Accounts receivable 11,700 Supplies 550 Prepaid insurance 630 Service trucks 16,300 Accumulated depreciation 8,400 Other assets 9,860 Accounts payable 2,220 Wages payable Income taxes payable Notes payable, long-term 15,000 Common stock (4,100 shares outstanding) 1,936 Additional paid-in capital 17,424 Retained earnings 4,600 Service revenue 85,680 Wages expense 16,200 Remaining expenses(not detailed; excludes income…
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Tunstall, Inc.Unadjusted Trial Balancefor the Year Ended December 31 Debit Credit Cash 46,800 Accounts receivable 11,700 Supplies 550 Prepaid insurance 630 Service trucks 16,300 Accumulated depreciation 8,400 Other assets 9,860 Accounts payable 2,220 Wages payable Income taxes payable Notes payable, long-term 15,000 Common stock (4,100 shares outstanding) 1,936 Additional paid-in capital 17,424 Retained earnings 4,600 Service revenue 85,680 Wages expense 16,200 Remaining expenses(not detailed; excludes income…
Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31:
[The following information applies to the questions displayed below.] Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Tunstall, Inc.Unadjusted Trial Balancefor the Year Ended December 31 Debit Credit Cash 46,800 Accounts receivable 11,700 Supplies 550 Prepaid insurance 630 Service trucks 16,300 Accumulated depreciation 8,400 Other assets 9,860 Accounts payable 2,220 Wages payable Income taxes payable Notes payable, long-term 15,000 Common stock (4,100 shares outstanding) 1,936 Additional paid-in capital 17,424 Retained earnings 4,600 Service revenue 85,680 Wages…
For each of the following situations, identify whether a change in accounting estimate, change in accounting policy, or an accounting error has occurred. Also indicate whether the change or correction should be made prospectively or retrospectively. The accounting clerk did not record a shipment of product on the last day of the previous fiscal year, because the customer had not yet paid for the product. The shipment was made FOB shipping point. In the past, Uni-Focus Company used the cash basis of accounting. This year, the Company is changing to the accrual basis of accounting. Tri-Facet Ltd follows ASPE. Management of Tri-Facet decided to switch from using the taxes payable method to using the future income tax method.
On May 3, it was discovered that the following errors took place in journalizing and posting transactions: a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance. b. A withdrawal of $10,000 by Brian Phillips, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash.
Bonsu is the owner of a retail business. He has employed an inexperienced book-keeper to maintain the accounting records. On 31st December 2020, the end of the business’s accounting year, the book-keeper extracted the following trial balance. Trial balance as at 31st December 2020 Debit (GHS) Credit (GHS) Sales 1,250,000 Purchases 700,000 Discount Allowed 18,300 Carriage Inwards 28,000 Carriage Outwards 31,200 Rent, rate & insurance 61,700 Heating & Lighting 38,000 Postage & stationery 4,200 Advertising…
Lowell Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by the bookkeeper reported $29,000 net income for 2019 and $37,000 net income for 2020. Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2019. The amount, $1,000, was recorded as revenue at that time even though the rental pertained to 2020. 2. Salaries and wages payable on December 31 have been consistently omitted from the records of that date and have been entered as expenses when paid in the following year. The amounts of the accruals recorded in this manner were: December 31, 2018 $1,100 December 31, 2019 1,200 December 31, 2020 940 3. Invoices for supplies purchased have been charged to expense…
For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).5. Davis Bicycle Company received a large order for the sale of 1,000 bicycles at $100 each. The customer paidDavis the entire amount of $100,000 on March 15. However, Davis did not record any revenue until April 17,the date the bicycles were delivered to the customer.