Question

The following journal entries were prepared and posted by an employee of International Marketing Company who does not have an adequate knowledge of accounting.

GENERAL JOURNAL PAGE

3 Date Description Post. Ref. Debit Credit 2019 April 1 Accounts Payable 14,300 Fees Income 14,300 Performed services on credit 2 Cash 690 Telephone Expense 690 Paid for March telephone service, Check 1917 3 Office Equipment 8,720 Office Supplies 990 Cash 10,300 Purchased file cabinet and office supplies, Check 1918 (Assume that Office Equipment and Office Supplies were recorded at the correct values.) Required: Examine the above journal entries carefully and prepare the correcting journal entries. Analyze: After the correcting journal entries have been posted, what effect do the corrections have on the company’s reported assets?

Answer 1

International Marketing Company Journal entries Date Account 1-Apr Accounts Receivable Accounts Payable Impact on Liabilities Equity Credit Debit $ 14,300 Calculation Assets $ 14,300 $ 14,300 $ 14,300 $ 1,380 =690*2 $(1,380) 2-Apr Telephone Expense Cash $ 1,380 $ (1,380) $ $ 8,720 990 3-Apr Office Equipment Office Supplies Cash Record correct entry $ 8,720 $ 990 $ (9,710) $ 9,710 =8,720+990 $ 10,300 3-Apr Cash Office Equipment Office Supplies Reverse entry $ $ 8,720 990 $ 10,300 $ (8,720) $ (990) $ 13,510 $ 14,300 $(1,380) Analyze Effect of corrections on reported assets $ 13,510