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In: Accounting

Streamlined Inc. hired a new accountant named Clark Dolittle. After a hectic first week on the...

Streamlined Inc. hired a new accountant named Clark Dolittle. After a hectic first week on the job, the Controller noted that Clark may have made some accounting errors journalizing transactions.  

Prepare the correcting entries to correct Clark’s errors. Explanations are not required.

a) The owner was reimbursed for a $1,900 freight bill paid with his personal funds for some inventory received.   Clark recorded the reimbursement cheque to the owner as a debit to Owner’s Withdrawals and he credited Cash.   Streamlined Inc. uses the perpetual inventory method.

b) Inventory of $7,200 was purchased for cash. Clark debited Inventory for $720 and credited cash for $720.

Solutions

Expert Solution

The correcting entries to correct Clark’s errors

Transaction Account Titles and Explanation Debit ($) Credit ($)
(a) Inventory A/c                   1,900
      To To Owner’s Withdrawal A/c                   1,900
[The entry to reverse the debit of Owner’s Withdrawals]
(b) Inventory A/c [$7,200 - $720]                   6,480
      To Cash A/c                   6,480
[The correcting entry to increase the inventory value shortage of $6,480]

ekkarill92 answered 2 years ago
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