Accountants for Jones Street Transcription Services encountered the following situations while adjusting and closing the books at December 31. Consider each situation independently.

a. The office assistant made the following entry to record a $4,900 credit purchase of office equipment:

1. Correct the error by reversing the incorrect entry and preparing the correct entry on December 31. Include an explanation.

2. Prepare the correcting entry, dated December 31, without reversing the incorrect entry. Include an explanation.

b. A $9,000 credit to Accounts Receivable was posted as a debit.

1. At what stage of the accounting cycle will this error be detected?

2. Describe the technique for identifying the amount of the error.

c. The $88,500 balance of Equipment was entered as $8,850 on the trial balance.

1. What is the name of this type of error?

2. Assume this is the only error in the trial balance. Which will be greater, the total debits or the total credits, and by how much?

3. How can this type of error be identified?

d. Compute the effect of failing to make the following adjusting entries at December 31 on the net income of the business:

1. Accrued property tax expense, $3,400.

2. Supplies expense, $8,080.

3. Accrued interest revenue on a note receivable, $7,800.

4. Amortization of equipment, $11,400.

5. Earned service revenue that had been collected in advance, $15,300.

e. Record each of the adjusting entries identified in item d. Include an explanation.

f. The revenue and expense accounts, after the adjusting entries had been posted but prior to closing, were Service Revenue, $115,200; Interest Revenue, $9,000; Salaries Expense, $25,380; Rent Expense, $7,650; Amortization Expense, $12,320; S. Jones, Capital, $72,900, and S. Jones, Withdrawals, $45,000. Journalize the closing entries. Include explanations.

Transcribed Image Text:

Nov. 12 Office Supplies Accounts Payable 4,900 4,900