Mastery Problem: Analyzing Transactions

KL Company Inc.

In February, Katie Long formed KL Company Inc. Transactions for the month of March have been posted to the T accounts. An intern has prepared a trial balance from the T accounts, but there seem to be some errors.

T accounts

Cash
Bal.	8,000	3/3	2,300
3/25	7,500	3/27	1,275
3/28	6,500	3/29	3,525
3/30	8,125	3/31	1,850

Accounts Receivable
Bal.	1,950
3/18	9,725	3/30	8,125

Supplies
Bal.	225
3/7	1,550

Office Equipment
3/2	16,500

Accounts Payable
3/27	1,275	Bal.	1,250
		3/7	1,550

Notes Payable
		3/2	16,500

Common Stock
		Bal.	7,500
		3/28	6,500

Retained Earnings
		Bal.	1,425

Dividends
3/31	1,850

Fees Earned
		3/18	9,725
		3/25	7,500

Rent Expense
3/3	2,300

Wages Expense
3/29	3,525

Required:

Transactions

Descriptions of the transactions for the month of March are provided in the following table. Each of the transactions that follow has been posted to the T accounts. Referring to the T accounts, select the date on which each transaction occurred, enter the amount of the transaction, and select the account to debit and credit.

Transaction	Date	Amount	Debit	Credit
Purchased equipment, giving a note payable for the purchase price.		$fill in the blank e303b9055f8c034_2
Paid rent for April.		$fill in the blank e303b9055f8c034_6
Purchased supplies on account.		$fill in the blank e303b9055f8c034_10
Recorded fees earned on account.		$fill in the blank e303b9055f8c034_14
Received cash for fees earned.		$fill in the blank e303b9055f8c034_18
Paid creditors on account.		$fill in the blank e303b9055f8c034_22
KL Company Inc. issued additional shares of common stock in exchange for cash.		$fill in the blank e303b9055f8c034_26
Paid wages.		$fill in the blank e303b9055f8c034_30
Received cash from customers on account.		$fill in the blank e303b9055f8c034_34
KL Company Inc. paid dividends to its stockholders.		$fill in the blank e303b9055f8c034_38

Trial Balance: Unequal Totals

The intern has prepared the following trial balance for the month of March.

KL Company Inc. Unadjusted Trial Balance March 31, 20Y3
Account Title	Debit Balances	Credit Balances
Cash	25,775
Accounts Receivable		3,550
Supplies	1,775
Office Equipment	16,500
Accounts Payable	1,525
Notes Payable		16,500
Common Stock		14,000
Retained Earnings	1,425
Dividends		1,850
Fees Earned		9,725
Rent Expense	3,200
Wages Expense		3,525
	50,200	49,150

Trial Balance: Correct

The Trial Balance: Unequal Totals was prepared by the intern. The intern is puzzled by the unequal totals. Prepare a corrected trial balance. If an amount box does not require an entry, leave it blank.

KL Company Inc. Unadjusted Trial Balance March 31, 20Y3
Account Title	Debit Balances	Credit Balances
Cash	fill in the blank cc59e405406dfea_1	fill in the blank cc59e405406dfea_2
Accounts Receivable	fill in the blank cc59e405406dfea_3	fill in the blank cc59e405406dfea_4
Supplies	fill in the blank cc59e405406dfea_5	fill in the blank cc59e405406dfea_6
Office Equipment	fill in the blank cc59e405406dfea_7	fill in the blank cc59e405406dfea_8
Accounts Payable	fill in the blank cc59e405406dfea_9	fill in the blank cc59e405406dfea_10
Notes Payable	fill in the blank cc59e405406dfea_11	fill in the blank cc59e405406dfea_12
Common Stock	fill in the blank cc59e405406dfea_13	fill in the blank cc59e405406dfea_14
Retained Earnings	fill in the blank cc59e405406dfea_15	fill in the blank cc59e405406dfea_16
Dividends	fill in the blank cc59e405406dfea_17	fill in the blank cc59e405406dfea_18
Fees Earned	fill in the blank cc59e405406dfea_19	fill in the blank cc59e405406dfea_20
Rent Expense	fill in the blank cc59e405406dfea_21	fill in the blank cc59e405406dfea_22
Wages Expense	fill in the blank cc59e405406dfea_23	fill in the blank cc59e405406dfea_24
	fill in the blank cc59e405406dfea_25	fill in the blank cc59e405406dfea_26

Errors on Trial Balance

Compare the trial balance prepared by the intern (Trial Balance: Unequal Totals) to the trial balance that you prepared (Trial Balance: Correct). In the following table, select the accounts for each type of error. Not all accounts contain errors.

Error Type

Cash

Accounts Receivable

Supplies

Office Equipment

Accounts Payable

Notes Payable

Common Stock

Retained Earnings

Dividends

Fees Earned

Rent Expense

Wages Expense

Transposition

Incorrectly reported as a debit

Incorrectly reported as a credit

Balance computed incorrectly

Accounting Equation

The intern is puzzled and asks "Are you sure the accounting equation is still in balance?" Using the corrected trial balance you prepared, prove that the accounting equation is in balance.

Assets	=	Liabilities	+	Stockholders' Equity
$fill in the blank 3b25a0fbd06ffa0_1	=	$fill in the blank 3b25a0fbd06ffa0_2	+	$fill in the blank 3b25a0fbd06ffa0_3

Still puzzled, the intern asks "Why do none of the amounts in the accounting equation equal the totals on the trial balance?"

a.	The accounts with debit balances are not all classified in the same element of the accounting equation. For example, not all accounts with debit balances are assets.
b.	This is because the revenue and expense accounts are part of the stockholders equity element. The accounts with debit balances should be part of the total assets.
c.	You point out the total of the assets, liabilities and stockholders equity is equal to the sum of the debit and credit totals on the trial balance.
d.	The accounts with credit balances are not all classified in the same element of the accounting equation. For example, not all accounts with credit balances are liabilities.
e.	The accounts that make up the total for stockholders equity have a mix of debit and credit balances.