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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Record general journal entries to correct the errors described below. Assume that the incorrect entries were posted in the same period in which the errors occurred and were recorded using the periodic inventory system.

  1. a. A freight cost of $85 incurred on equipment purchased for use in the business was debited to Freight In.
  2. b. The issuance of a credit memo to Lang Company for $119 for merchandise returned was recorded as a debit to Purchases Returns and Allowances and a credit to Accounts Receivable, Lang Company.
  3. c. A cash sale of $68 to J. L. LaSalle was recorded as a sale on account.
  4. d. A purchase of merchandise from James Company in the amount of $750 with a 25 percent trade discount was recorded as a debit to Purchases and a credit to Accounts Payable of $750 each.

To determine

Prepare the general journal entry to rectify the incorrect entries.

Explanation

General journal is a record of financial transaction. The transactions are recorded in the journal prior to posting them to the accounts in the general ledger.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Rectified journal entries:

a) Wrong debit of $85 in freight in.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
Equipment 85 
   Freight in  85
  (Record correct entry in which freight cost equipment was debited in freight in)   

Table (1)

Description:

  • Equipment is a long term asset account. Since the equipment was purchased and a freight cost of $85 occurred. Therefore, asset account increased, and an increase in asset is debited.
  • Freight in is an expense account. A decrease in expense increases the equity value, and an increase in equity is credited.

 b) Instead of sale returns and allowances, wrongly debited the purchase return and allowances.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
Sales returns and allowances 119 
   Purchases returns and allowances  119
  (Record correct entry in which wrongly debit of purchase returns and allowances   

Table (2)

Description:

  • Sale returns and allowances is a contra revenue account. Normally, contra revenue accounts have debit balance...

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