Question

Resolving Errors and Correcting a Trial Balance Assume we examine the accounts of Century Inc. and identify the following four errors. 1. Equipment purchased for $60,000 at year-end was debited to Expenses. 2. Sales on credit of $6,632 were debited to Accounts Receivable for $7,136 and credited to Revenues for $6,632. 3. A $48,000 cash collection on accounts receivable was debited to Cash and credited to Revenues. 4. The inventory amount is understated by $16,000 because the entry to record the purchase of inventory was incorrectly recorded in cost of goods sold (cost of goods sold is included in Expenses). The unadjusted trial balance of Century Inc. is provided below. Prepare a corrected unadjusted trial balance. Note: Do not use negative sign in your answers. Unadjusted Trial Balance Corrected Unadjusted Trial Balance Accounts Debit Credit Credit Cash $ 284,504 $ $ 332,504 * $ 0 Accounts receivable 248,000 207,136 X Allowance for doubtful accounts (16,000) 0 Inventory 144,000 160,000 Equipment 1,452,000 1,512,000 Accumulated depreciation 96,000 0 Accounts payable 144,000 Notes payable 200,000 Common stock 1,440,000 0 Retained earnings 112,000 118,632 x Revenues 600,000 Expenses 480,000 524,000 x 0 Net earnings $2,592,504 $2,592,000 $ 0 $ ох x x x

Answer 1

Answer:

	Unadjused Trial Balance		Corrected Unadjuated trial balance
Accounts	Debit	Credit	Debit	Credit
Cash	$284,504		$284,504
Accounts receivable	$248,000		$199,496
Allowance for doubtful accounts	($16,000)			$16,000
Inventory		$144,000	$160,000
Equipment	$1,452,000		$1,512,000
Accumulated depreciation		$96,000		$96,000
Accounts payable	$144,000			$144,000
Notes payable		$200,000		$200,000
Common stock		$1,440,000		$1,440,000
Retained earnings		$112,000		$112,000
Revenues		$600,000		$552,000
Expenses		$480,000	$404,000
Net earnings	$2,112,504	$3,072,000	$2,560,000	$2,560,000

Calculations:

Accounts	Debit	Credit
Cash	$284,504
Accounts receivable	248000-504-48000
Allowance for doubtful accounts		$16,000
Inventory	144000+16000
Equipment	1452000+60000
Accumulated depreciation		$96,000
Accounts payable	$144,000
Notes payable		$200,000
Common stock		$1,440,000
Retained earnings		$112,000
Revenues		600000-48000
Expenses	480000-60,000-16000

Inventory & Expenses should have a 'Debit' balance and

Allowance for doubtful account should have a 'credit balance'