Accountants for Kitok Catering Service, Inc., encountered the following situations while adjusting and closing the books at December 31. Consider each situation independently.

a. The \(\$ 39,000\) balance of Equipment was entered as \(\$ 3,900\) on the trial balance.

(1) What is the name of this type of error?

(2) Assume that 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?

b. The company bookkeeper made the following entry to record a \(\$ 600\) credit purchase of office equipment:

Prepare the correcting entry, dated December 31.

c. A \(\$ 750\) dēbit to Cash was posted as a credit.
(1) At what stage of the accounting cycle will this error be detected?
(2) Describe the technique for identifying the amount of the error.

d. The accountant failed to make the following adjusting entries at December 31:
(1) Accrued property tax expense, \(\$ 200\).
(2) Supplies expense, \(\$ 1,090\).
(3) Accrued interest revenue on a note receivable, \(\$ 650\).
(4) Depreciation of equipment, \(\$ 4,000\).
(5) Earned service revenue that had been collected in advance, \(\$ 5,100\).
Compute the overall net income effect of these omissions.

e. Record each of the adjusting entries identified in item \(d\).

f. The revenue and expense accounts, after the adjusting entries had been posted were Service Revenue, \(\$ 56,800\); Interest Revenue, \(\$ 2,000\); Salary Expense, \(\$ 14,200\); Rent Expense, \(\$ 5,100\); Depreciation Expense, \(\$ 5,550\); Supplies Expense, \(\$ 1,530\); and Property Tax Expense, \(\$ 1,190\). Two balances prior to closing were Retained Earnings, \(\$ 58,600\), and Dividends, \(\$ 30,000\). Journalize the closing entries.

Transcribed Image Text:

Nov. 12 Office Supplies....... Accounts Payable. 600 600