QUESTION 2 (CLO 3)

Your bookkeeper extracted a trial balance on 31 December 2019 which failed to agree by $400, a shortage on the credit side of the trial balance. A suspense account was opened for the difference.

In January 2020 the following errors made in 2019 were found:

i)Sales day book had been undercast by $300

ii)Sales of $500 to T. Ball had been undercast by $200

iii)Rent account had been undercast by $200

iv)Discounts allowed account had been overcast by $50

v)The sale of a computer at net book value had been credited in error to the sales account $400.

Required:

a)Show the journal entries necessary to correct the errors.(10 marks)

b)Draw up the suspense account after the errors described have been corrected.(4 marks)

c)If the net profit had previously been calculated at $30,000 for the year ending

31 December 2019, show the calculations of the corrected net profit. (6 marks)