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 Bal. 8,000 Cash 3/3 2,300 3/25 7,500 3/27 1,275 3/28 6,000 3/29 3,625 3/30 7,900 3/31 1,900 Accounts Receivable Bal. 3/18 1,950 9,800 3/30 7,900 Bal. 3/7 3/2 Supplies 225 1,550 Office Equipment 19,000 Accounts Payable 3/27 1,275 Bal. 1,250 3/7 1,550 Notes Payable 3/2 19,000 Common Stock Bal. 7,500 3/28 6,000 Retained Earnings Bal. Dividends 3/31 1,900 1,425 Fees Earned 3/18 9,800 3/25 7,500 Rent Expense 3/3 2,300 3/29 Wages Expense 3,625 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 Purchased equipment, giving a note payable for the purchase price. Paid rent for April. Purchased supplies on account. Recorded fees earned on account. Received cash for fees earned. Paid creditors on account. KL Company Inc. issued additional shares of common stock in exchange for cash. Paid wages. Received cash from customers on account. KL Company Inc. paid dividends to its stockholders. 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 24,900 Accounts Receivable 3,850 Supplies 1,775 Office Equipment 19,000 Accounts Payable 1,525 Date Amount Debit Credit Accounts Payable 1,525 Notes Payable 19,000 Common Stock 13,500 Retained Earnings 1,425 Dividends 1,900 Fees Earned 9,800 Rent Expense 3,200 Wages Expense 3,625 51,825 51,675 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 Accounts Receivable Supplies Office Equipment Accounts Payable Notes Payable Common Stock Retained Earnings Dividends Fees Earned Rent Expense Wages Expense Dividends Fees Earned Rent Expense Wages Expense 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 Transposition Incorrectly reported as a debit Incorrectly reported as a credit Balance computed incorrectly Cash Accounts Receivable Supplies Office Equipment Accounts Payable Notes Payable Common Stock 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. = Liabilities + Stockholders' Equity Assets = $ 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. Retained Earnings Dividends Fees Earne