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Adjusting entries from trial balances The accountant for Eva’s Laundry prepared the following unadjusted and adjusted trial balances. Assume that all balances in the unadjusted trial balance and the amounts of the adjustments are correct. Identify the errors in the accountant’s adjusting entries, assuming that none of the accounts were affected by more than one adjusting entry.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 3, Problem 27E
Textbook Problem
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Adjusting entries from trial balances

The accountant for Eva’s Laundry prepared the following unadjusted and adjusted trial balances. Assume that all balances in the unadjusted trial balance and the amounts of the adjustments are correct. Identify the errors in the accountant’s adjusting entries, assuming that none of the accounts were affected by more than one adjusting entry.

Chapter 3, Problem 27E, Adjusting entries from trial balances The accountant for Evas Laundry prepared the following

To determine

Identify the errors in the accountant’s entries and prepare trial balance of Company LE as on May 31, 20Y9.

Explanation of Solution

Trial balance:

A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances. In trial balance the debit balances are recorded in the left column, and credit balances are recorded in the right column.

The following items have errors in the accountant’s adjusting entries:

  • Laundry revenue
  • Laundry supplies
  • Insurance expenses
  • Accumulated Depreciation
  • Wages expense

In error -1, the accounts receivable was debited for $5,000 ($23,250-$18,250)  but the laundry revenue was not credited for the same amount. This understates the laundry revenue balance recorded in trial balance. Hence, it is to be adjusted for $5,000.

  1. (1) Calculation of correct Laundry Revenue balance:

Correct Laundry Revenue} = (Laundryrevenueinthetrialbalance)+(Diffrencebetweentheadjustedandunadjustedaccountsreceivable)=($182,100)+($23,250-$18,250)=$182,100+$5,000=$187,100

In error -2, the laundry supplies expense, was credited for $3,000 instead of being debited for the same amount. Hence it should be adjusted for $3,000 in laundry supplies.

  1. (2) Calculation of correct Laundry Supplies balance:

Correct Laundry Supplies} = (Laundrysuppliesintheunadjustedtrialbalance)-(LaundrySuppliesexpense)=($3,750)-($3,000)=$750

In error-3, the prepaid insurance account was credited for $3,600($5,200-$1,600)(3), but the insurance expense account was debited only for $600 instead of $3,600

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Chapter 3 Solutions

Financial And Managerial Accounting
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