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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781337119207

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BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781337119207
Textbook Problem

Corrected trial balance

Tech Support Services has the following unadjusted trial balance as of January 31, 2018:

Tech Support Services Unadjusted Trial Balance January 31, 2018
  Debit Balances Credit Balances
Cash 25,550  
Accounts Receivable 44,050  
Supplies 6,660  
Prepaid Insurance 3,600  
Equipment 162,000  
Notes Payable   75,000
Accounts Payable   13,200
Common Stock   18,000
Retained Earnings   83,850
Dividends 33,000  
Fees Earned   534,000
Wages Expense 306,000  
Rent Expense 62,550  
Advertising Expense 23,850  
Gas, Electricity, and Water Expense 17,000  
684,260 724,050

The debit and credit totals are not equal as a result of the following errors:

  • A. The cash entered on the trial balance was overstated by $8,000.
  • B. A cash receipt of $4,100 was posted as a debit to Cash of $ 1,400.
  • C. A debit of $ 12,350 to Accounts Receivable was not posted.
  • D. A return of $235 of defective supplies was erroneously posted as a $325 credit to Supplies.
  • E. An insurance poky acquired at a cost of $3,000 was posted as a credit to Prepaid Insurance.
  • F. The balance of Notes Payable was overstated by $21,000.
  • G. A credit of $3,450 in Accounts Payable was overlooked when the balance of the account was determined.
  • H. A debit of $6,000 for dividends was posted as a debit to Retained Earnings.
  • I. The balance of $28,350 in Advertising Expense was entered as $23,850 in the trial balance.
  • J. Miscellaneous Expense, with a balance of $4,600, was omitted from the trial balance.

Instructions

  1. 1. Prepare a corrected unadjusted trial balance as of January 31, 2018.
  2. 2. Does the fact that the unadjusted (trial balance in (1) is balanced mean that there are no errors in the accounts? Explain.

(1)

To determine

Corrected unadjusted trial balance:

The corrected unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts after making adjusting journal entries. The corrected unadjusted trial balance is also known as adjusted trial balance.

To prepare: A corrected unadjusted trial balance as of January 31, 2018.

Explanation

c.

An amount of $12,350 was not debited to accounts receivable (asset) account. Hence, by debiting the amount, the accounts receivable in the corrected unadjusted trial balance would be $56,400 [$44,050(unadjusted)+$12,350] .

d.

As a return of defective supplies of $235 was wrongly credited to the supplies (asset) account as $325, it is to be corrected by debiting the Supplies account with an amount of $90 ($325$235) . Hence, the amount of Supplies in the corrected unadjusted trial balance would be $6,750 [$6,660(unadjusted)+$90] .

e.

As the purchase of insurance policy at a cost of $3,000 was wrongly credited to prepaid insurance (asset) account, it is to be corrected by debiting the prepaid insurance account with an amount of $6,000 ($3,000+$3,000). Hence, the amount of prepaid insurance in the corrected unadjusted trial balance would be $9,600 [$3,000(unadjusted)+$6,000] .

f.

As notes payable (liability) was understated by an amount of $21,000, it is to be corrected by crediting the notes payable amount with an amount of $21,000. Hence, the amount of notes payable account in the corrected unadjusted balance would be $54,000 [$75,000(unadjusted)$21,000]

2.

To determine

To Discuss: Whether the fact of the balancing of unadjusted trial balance in (1) means that there are no errors in the accounts.

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