Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615



Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem

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 a mounts 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 3.27EX, Adjusting entries from trial balances The accountant for Evas Laundry prepared the following

To determine

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.

To identify: The errors in the accountant’s entries and to prepare the corrected trial balance of the Laundry E as on May 31, 2016.


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

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

The rectified adjusted trial balance of the Laundry E is shown below:

Laundry E
Trial balance
Particulars Debit ($) Credit ($)
Cash 7,500
Accounts receivable 23,250
Laundry Supplies (2) 750
Prepaid insurance 1,600
Laundry equipment 190,000
Accumulated Depreciation-Laundry Equipment (4)61,000
Accounts payable9,600
Wages Payable1,000
Drawings 28,775
Laundry revenue (1)187,100
Wages expenses (5) 50,200
Rent expenses 25,575
Utilities expenses 18,500
Depreciation expense 13,000
Laundry Supplies expenses 3,000
Insurance expense (3) 3,600
Miscellaneous expense 3,250
369,000 369,000

Table (1)

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.

Calculation of correct Laundry Revenue balance:

Correct Laundry Revenue} = (Laundryrevenueinthetrialbalance)+(Diffrencebetweentheadjustedandunadjustedaccountsreceivable)=($182,100)+($23,250-$18,250)=$182,100+$5,000=$187,100 (1)

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

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