Bob Hibberd, CGA, was hired by Edgemont Entertainment Installations to prepare its financial statements for April 2014. Using all the ledger balances in the owner's records, Bob put together the following trial balance:

Bob reviewed the records and found the following errors:
1. The first salary payment made in April was for $1,900, which included $650 of salaries payable on March 31. The payment was recorded as a debit to Salaries Expense of $2,100 and a credit to Cash of $2,100. (No reversing entries were made on April 1.)
2. The owner, Stuart Morris, paid himself $2,400 and recorded this as salary expense.
3. April rent of $950 was paid on April 26. It was recorded as a debit to rent payable and a credit to cash, both for $950.
4. Cash paid on account was recorded as $740 instead of $470.
5. A payment of $195 for an advertising expense was entered as a debit to Miscellaneous Expense of $95 and a credit to Cash of $95.
6. A cash payment for a repair expense on equipment of $460 was recorded as a debit to Equipment of $460 and a credit to Accounts Payable of $460.
7. Services of $1,250 were provided to a customer on account. Accounts receivable was debited $1,250 and Unearned Revenue was credited the same amount.
8. The depreciation expense for the month of April has not been recorded. All of the company's equipment is expected to have a five-year useful life.
Instructions
(a) Prepare an analysis of each error that shows (1) the incorrect entry, (2) the correct entry, and (3) the correcting entry.
(b) Prepare a correct trial balance.
Taking It Further
Explain how the company's financial statements would be incorrect if error 2 was not corrected and why it is important to correct this error.

Transcribed Image Text:

EDGEMONT ENTERTAINMENT INSTALLATIONS Trial Balance April 30, 2014 Debit 4,010 3,225 3,800 11,460 Credit Accounts receivable Supplies Equipment Accumulated depreciation-equipment 2,200 2,275 Salaries payable Rent payable Unearned revenue S. Morris, capital Service revenue Salaries expense Advertising expense Miscellaneous expense 950 1,250 17,700 7,400 585 595 $32,025 $32,025