Below is a list of accounts of Patel Consulting Ltd. at January 31, 2014. The unadjusted trial balance of Patel Consulting Ltd. at January 31, 2014, does not balance. In addition, the trial balance needs to be updated before the financial statements at January 31, 2014, can be prepared. The manager needs to know the current ratio of Patel Consulting Ltd.

Requirements
1. How much out of balance is the trial balance? The error is in the Land account.
2. Patel Consulting Ltd. needs to make the following adjustments at January 31:
a. Supplies of $600 were used during January.
b. The balance of Prepaid Rent was paid on January 1 and covers the rest of 2014. No adjustment was made January 31.
c. At January 31, Patel Consulting owes employees $400.
d. Unearned service revenue of $800 was earned during January. Prepare a corrected, adjusted trial balance. Give Land its correct balance.
3. After the error is corrected and after these adjustments are made, compute the current ratio of Patel Consulting Ltd. If your business had this current ratio, could you sleep at night?

Transcribed Image Text:

Patel Consulting Ltd. List of Accounts January 31, 2014 6,000 2,200 Accounts receivable Supplies Prepaid rent 12,000 41,000 Accounts payable Salary payable Unearned service revenue Note payable, due in three years Share capital. Retained earnings Service revenue 10,000 1,500 25,400 15,000 7,300 9,100 3,400 0 900 Rent expense Supplies expense