Question

[The following information applies to the questions displayed below.) You are told the column totals in a trial balance are not equal. After careful analysis, you discover only one error. Specifically, a correctly journalized credit purchase of an automobile for $18,300 is posted from the Journal to the ledger with an $18,300 debit to Automobiles and another $18,300 debit to Accounts Payable. The Automobiles account has a debit balance of $43,371 on the trial balance. Answer each of the following questions and compute the dollar amount of any misstatement 10. Part (a through d): For each of the following statements: 1. Select the appropriate choice from the 'Account Status' column 2. In cases where the amount is understated or overstated, use the 'Amount column to fill in the amount by which the account or trial balance total is understated or overstated (Enter the amounts understated with a minus sign.) Account Status Amount Statements a. The debit column total of the trial balance b. The credit column total of the trial balance The balance of the automobiles account in the trial balance The balance of the accounts payable account in the trial balance C d

Answer 1

Select the appropriate account status and amount:

a b Statements The debit column total of the trial balance The credit column total of the trial balance The balance of the automobile account in the trial balance The balance of the accounts payable account in the trial balance Account status Overstated Understated Correctly stated Understated Amount $18,300 ($18,300) $0 ($36,600) с d

Explanation:

a. The debit column is overstated by $18,300 as the accounts payable are debited instead o credited which is increasing the debit side of the trial balance.

b. The credit column is understated as the accounts payable was debited. However, it should be credited. Therefore, it is understated by $18,300

c. The automobile account balance is correctly stated as it is debited by $18,300 which is the correct treatment.

d. The accounts payable account balance is understated by $36,600 because it should have been credited with $18,300 but erroneously it is debited with the same amount. Therefore, it is understated by double amount ($18,300 × 2 = $36,600).

e. Total of credit column $347,700

Explanation:

e. The total of credit column is understated by $36,600 than the debit column; thus, it must be $36,600 less than the debit side before correction. The total of credit column should be $347,700 ($384,300 - $36,600).