Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 2, Problem 2.5APR
Corrected
The Lexington Group has the following unadjusted trial balance as of May 31, 2018:
The Lexington Group Unadjusted Trial Balance May 31, 2018 | ||
Debit Balances | Credit Balances | |
Cash | 20,350 | |
Accounts Receivable | 37,000 | |
Supplies | 1,100 | |
Prepaid Insurance | 200 | |
Equipment | 171,175 | |
Notes Payable | 36,000 | |
Accounts Payable | 26,000 | |
Common Stock | 50,000 | |
Retained Earnings | 94,150 | |
Dividends | 15,000 | |
Fees Earned | 429,850 | |
Wages Expense | 270,000 | |
Rent Expense | 63,000 | |
Advertising Expense | 25,200 | |
Miscellaneous Expense | 5,100 | |
608,125 | 636,000 |
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 $7,000.
- B. A cash receipt of $8,200 was posted as a debit to Cash of $2,800.
- C. A debit of $ 16,500 to Accounts Receivable was not posted.
- D. A return of $125 of defective supplies was erroneously posted as a $1,250 credit to Supplies.
- E. An insurance policy acquired at a cost of $3,600 was posted as a credit to Prepaid Insurance.
- F. The balance of Notes Payable was understated by $9,000.
- G. A credit of $10,000 in Accounts Payable was overlooked when determining the balance of the account.
- H. A debit of $5,000 for dividends was posted as a credit to Retained Earnings.
- I. The balance of $60,300 in Rent Expense was entered as $63,000 in the trial balance.
- J. Gas, Electricity, and Water Expense, with a balance of $16,350, was omitted from the trial balance.
Instructions
- 1. Prepare a corrected unadjusted trial balance as of May 31, 2018.
- 2. Does the fact that the unadjusted trial balance in (1) is balanced mean that there are no errors in the accounts? Explain.
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Required Information
On January 1, 2024, the general ledger of TNT Fireworks includes the following account balances:
Accounts
Cash
Accounts Receivable
Debit
$ 58,800
25,200
Credit
Allowance for Uncollectible Accounts
$ 2,300
Inventory
36,400
Notes Receivable (5%, due in 2 years)
13,200
Land
156,000
Accounts Payable
Common Stock
14,900
221,000
51,400
$ 289,600 $ 289,608
Retained Earnings
Totals
During January 2024, the following transactions occur.
January 1 Purchase equipment for $19,680. The company estimates a residual value of $1,600 and a six-year service
life.
January 4 Pay cash on accounts payable, $9,600.
January 8 Purchase additional inventory on account, $83,980.
January 15 Receive cash on accounts receivable, $22,100.
January 19 Pay cash for salaries, $29,980.
January 28 Pay cash for January utilities, $16,500.
January 38 Firework sales for January total $221,008. All of these sales are on account. The cost of the units sold is
$115,580.
Information for adjusting entries:
a.…
Required Information
On January 1, 2024, the general ledger of TNT Fireworks includes the following account balances:
Accounts
Cash
Accounts Receivable
Debit
Credit
$ 58,800
25,200
Allowance for Uncollectible Accounts
$ 2,300
Inventory
36,400
Notes Receivable (5%, due in 2 years)
13,200
156,000
Common Stock
14,900
221,800
51,488
Land
Accounts Payable
Retained Earnings
Totals
$ 289,600 $ 289,600
During January 2024, the following transactions occur:
January 1 Purchase equipment for $19,600. The company estimates a residual value of $1,608 and a six-year service
life.
January 4 Pay cash on accounts payable, $9,600.
January 8 Purchase additional inventory on account, $83,980.
January 15 Receive cash on accounts receivable, $22,100.
January 19 Pay cash for salaries, $29,900.
January 28 Pay cash for January utilities, $16,500.
January 30 Firework sales for January total $221,088. All of these sales are on account. The cost of the units sold is
$115,500.
Information for adjusting entries:
a.…
Journalizing transactions using the direct write-off method versus the allowance method
During August 2018, Lima Company recorded the following:
• Collections on account, $106,400.
• Write-offs of uncollectible receivables, $990.
• Recovery of receivable previously written off, $800.
Requirements
Journalize Lima’s transactions during August 2018, assuming Lima uses the direct write-off method.
Journalize Lima’s transactions during August 2018, assuming Lima uses the allowance method.
Chapter 2 Solutions
Corporate Financial Accounting
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