The bookkeeper for Cater's Dance Studio Ltd. did the following in journalizing and posting:

1. A debit posting to the Interest Revenue account of $600 was omitted.

2. A credit of $500 for revenue received in advance was posted as a credit to the Unearned Service Revenue account.

3. A purchase of supplies on account of $540 was debited to Merchandise Inventory for $540 and credited to Accounts Payable for $540.

4. A credit to the Wages Payable account for $1,200 was posted as a credit to the Cash account.

5. A debit posting of $250 to the Cash account was posted twice.

6. The debit side of the entry to record the payment of $600 for dividends was posted to the Salaries Expense account.

7. The collection of an account receivable of $250 was posted as a debit to the Cash account and a credit to the Accounts Payable account.

8. The provision of services on account was debited to Accounts Receivable and credited to Service Revenue.

9. A purchase of equipment on account for $4,600 was posted as a $6,400 debit to Equipment and a $6,400 credit to Cash.

10. Rent of $1,000 for the month was paid but was neither recorded nor posted.

Instructions

(a) Indicate which of the above transactions are correct, and which are incorrect.

(b) For each error identified in (a), answer the following questions:

1. Will the trial balance be in balance?

2. Which account(s) will be incorrectly stated because of the error?

3. State whether each of the incorrect account(s) you identified in (2) will be overstated or understated, and by how much.