Question 2

The trial balance of Harris as at 31 December 20x1 showed a difference which was posted to a suspense account. Drafted final accounts for the year ended 31 December 20x1 were prepared showing a net profit of $47,240. The following errors were subsequently found:

1. Sales of $450 to Thomas Chan had been debited to Thomson Chan.

2. A payment of $275 for electricity charges had been entered on the debit side of the electricity account as$375.

3. The sales journal had been undercast by $2,000

4. Repairs to a machine amounting to $390 had been charged to Machinery account.

5. A cheque for $1,500 being rent received from Atlas Ltd had only been entered in the Cash Book.

6. Purchases from K Ltd of $765 had been completely omitted.

Required:

1. Prepare journal entries, without narratives, necessary to correct the above errors. (20 marks)

2. Show the effect of each of these adjustments on the net profit in the drafted financial statements and the corrected profit for the year ended 31 December 20x1. (15 marks)