The accountants of Price Septic Service, Inc., encountered the following situations while adjusting and closing the books at February 28. Consider each situation independently.

a. The \(\$ 1,620\) balance of Utilities Expense was entered as \(\$ 16,200\) 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 \(\$ 950\) credit purchase of supplies:

Prepare the correcting entry, dated February 28.

c. A \(\$ 690\) credit to Accounts Receivable was posted as \(\$ 960\).
(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 February 28:
(1) Accrued service revenue, \(\$ 900\).
(2) Insurance expense, \(\$ 360\).
(3) Accrued interest expense on a note payable, \(\$ 520\).
(4) Depreciation of equipment, \(\$ 3,700\).
(5) Earned service revenue that had been collected in advance, \(\$ 2,700\).
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, \(\$ 97,330\); Wage Expense, \(\$ 29,340\); Depreciation Expense, \(\$ 6,180\); Interest Expense, \(\$ 4,590\); Utilities Expense, \(\$ 1,620\); and Insurance Expense, \(\$ 640\). Two balances prior to closing were Retained Earnings, \(\$ 75,150\), and Dividends, \(\$ 44,000\). Journalize the closing entries.

Transcribed Image Text:

Feb. 26 Equipment. Accounts Payable....... 950 950