In: Accounting
During a maternity leave of the full-time bookkeeper at a
privately owned furniture repair business, a temporary employee was
involved in the following transactions.
1.
Work was completed on the order for one of the customers who had
paid the full price in advance of $570 several months ago. At that
time it was recorded as unearned revenue. The journal entry to
record completing the work was a debit to Cash and a credit to
Service Revenue.
2.
A cheque in the amount of $1,070 was received in payment of a
customer’s account: Accounts Receivable was debited and Cash was
credited.
3.
Prepaid insurance for $490 was paid by cheque. The resulting entry
included a debit to Prepaid Insurance and a credit to Insurance
Expense for $490.
4.
10 cartridges of printer toner were purchased on account for $580.
This transaction was recorded as a debit to Equipment and a credit
to Accounts Payable. None of the cartridges has been used.
5.
Interest for one month on a $5,600 note payable was accrued as a
debit to Interest Expense and credit to Interest Payable for $560.
The annual rate of interest is 10%.
6.
When the owner, L. Lowe, used $1,140 cash for personal expenses, a
debit was made to L. Lowe, Capital and a credit was made to
Cash.
7.
Equipment costing $440 was purchased on account. This was recorded
with a debit to Repairs Expense and a credit to Cash.
Correct each error by reversing the incorrect entry and then
recording the correct entry. (Credit account titles are
automatically indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Debit
Credit
1.
Reversing incorrect entry:
Prepaid Insurance
Cash
Repairs Expense
Service Revenue
Unearned Revenue
Accounts Payable
Interest Payable
Accounts Receivable
Supplies
L. Lowe, Capital
Insurance Expense
L. Lowe, Drawings
Equipment
Interest Expense
Interest Payable
Cash
Supplies
Accounts Payable
Insurance Expense
Interest Expense
Repairs Expense
Service Revenue
Unearned Revenue
Accounts Receivable
Prepaid Insurance
L. Lowe, Capital
L. Lowe, Drawings
Equipment
Correct entry:
Supplies
Unearned Revenue
Accounts Payable
Repairs Expense
Accounts Receivable
L. Lowe, Capital
Interest Payable
Insurance Expense
Prepaid Insurance
Service Revenue
Equipment
Interest Expense
L. Lowe, Drawings
Cash
Repairs Expense
Prepaid Insurance
Insurance Expense
Unearned Revenue
L. Lowe, Drawings
Interest Expense
L. Lowe, Capital
Accounts Payable
Accounts Receivable
Service Revenue
Cash
Equipment
Supplies
Interest Payable
2.
Reversing incorrect entry:
L. Lowe, Drawings
Unearned Revenue
Equipment
Repairs Expense
Service Revenue
Accounts Receivable
Cash
Insurance Expense
Interest Payable
Prepaid Insurance
Accounts Payable
Supplies
Interest Expense
L. Lowe, Capital
Supplies
Unearned Revenue
Accounts Payable
Accounts Receivable
Insurance Expense
Prepaid Insurance
Interest Expense
Equipment
Interest Payable
L. Lowe, Capital
L. Lowe, Drawings
Repairs Expense
Service Revenue
Cash
Correct entry:
Interest Payable
Insurance Expense
Accounts Receivable
Prepaid Insurance
Repairs Expense
Equipment
L. Lowe, Capital
Accounts Payable
Unearned Revenue
Supplies
Interest Expense
L. Lowe, Drawings
Service Revenue
Cash
Cash
Prepaid Insurance
Supplies
Unearned Revenue
Interest Payable
Insurance Expense
L. Lowe, Capital
Service Revenue
Repairs Expense
Accounts Payable
L. Lowe, Drawings
Accounts Receivable
Equipment
Interest Expense
3.
Reversing incorrect entry:
Accounts Receivable
Interest Expense
L. Lowe, Drawings
Interest Payable
Insurance Expense
L. Lowe, Capital
Prepaid Insurance
Supplies
Repairs Expense
Service Revenue
Cash
Unearned Revenue
Accounts Payable
Equipment
Unearned Revenue
Service Revenue
Accounts Receivable
Insurance Expense
Interest Expense
Accounts Payable
L. Lowe, Capital
Prepaid Insurance
Interest Payable
Cash
Equipment
L. Lowe, Drawings
Repairs Expense
Supplies
Correct entry:
Accounts Receivable
L. Lowe, Drawings
Repairs Expense
Prepaid Insurance
Insurance Expense
Equipment
Supplies
Interest Expense
Interest Payable
Cash
L. Lowe, Capital
Unearned Revenue
Service Revenue
Accounts Payable
L. Lowe, Drawings
L. Lowe, Capital
Equipment
Cash
Repairs Expense
Supplies
Insurance Expense
Accounts Payable
Interest Expense
Unearned Revenue
Interest Payable
Accounts Receivable
Prepaid Insurance
Service Revenue
4.
Reversing incorrect entry:
Prepaid Insurance
Service Revenue
Interest Payable
Repairs Expense
Accounts Receivable
L. Lowe, Capital
Supplies
Interest Expense
Insurance Expense
Accounts Payable
Cash
Unearned Revenue
Equipment
L. Lowe, Drawings
Interest Payable
L. Lowe, Capital
L. Lowe, Drawings
Insurance Expense
Unearned Revenue
Prepaid Insurance
Accounts Payable
Repairs Expense
Service Revenue
Equipment
Supplies
Cash
Accounts Receivable
Interest Expense
Correct entry:
Repairs Expense
Interest Expense
L. Lowe, Drawings
L. Lowe, Capital
Service Revenue
Cash
Accounts Payable
Supplies
Accounts Receivable
Unearned Revenue
Insurance Expense
Prepaid Insurance
Equipment
Interest Payable
Cash
Unearned Revenue
Accounts Payable
Equipment
L. Lowe, Drawings
Repairs Expense
Supplies
Accounts Receivable
Interest Expense
Insurance Expense
Interest Payable
L. Lowe, Capital
Service Revenue
Prepaid Insurance
5.
Reversing incorrect entry:
Unearned Revenue
Prepaid Insurance
Equipment
Interest Expense
Supplies
Cash
Accounts Payable
Interest Payable
Accounts Receivable
L. Lowe, Capital
Insurance Expense
L. Lowe, Drawings
Repairs Expense
Service Revenue
Service Revenue
Prepaid Insurance
Interest Payable
Accounts Receivable
Accounts Payable
Insurance Expense
L. Lowe, Capital
Equipment
Cash
Unearned Revenue
Supplies
Interest Expense
L. Lowe, Drawings
Repairs Expense
Correct entry:
Prepaid Insurance
Interest Expense
Interest Payable
Unearned Revenue
Insurance Expense
L. Lowe, Capital
Accounts Payable
Equipment
Supplies
L. Lowe, Drawings
Repairs Expense
Accounts Receivable
Service Revenue
Cash
Equipment
Service Revenue
Insurance Expense
Supplies
L. Lowe, Capital
Cash
Unearned Revenue
L. Lowe, Drawings
Accounts Payable
Interest Payable
Accounts Receivable
Prepaid Insurance
Interest Expense
Repairs Expense
6.
Reversing incorrect entry:
Service Revenue
Equipment
Interest Expense
Interest Payable
Cash
Prepaid Insurance
L. Lowe, Capital
Repairs Expense
Unearned Revenue
Accounts Payable
L. Lowe, Drawings
Supplies
Accounts Receivable
Insurance Expense
Cash
Interest Payable
Interest Expense
Equipment
Prepaid Insurance
L. Lowe, Drawings
L. Lowe, Capital
Supplies
Repairs Expense
Service Revenue
Unearned Revenue
Accounts Receivable
Accounts Payable
Insurance Expense
Correct entry:
Cash
Interest Payable
L. Lowe, Capital
Accounts Receivable
Repairs Expense
Insurance Expense
Service Revenue
Prepaid Insurance
L. Lowe, Drawings
Unearned Revenue
Equipment
Accounts Payable
Supplies
Interest Expense
Insurance Expense
L. Lowe, Drawings
Supplies
Prepaid Insurance
Interest Expense
Cash
Equipment
Interest Payable
L. Lowe, Capital
Accounts Payable
Repairs Expense
Unearned Revenue
Service Revenue
Accounts Receivable
7.
Reversing incorrect entry:
Accounts Receivable
L. Lowe, Capital
Interest Expense
Supplies
Insurance Expense
Prepaid Insurance
Accounts Payable
Service Revenue
Interest Payable
Equipment
L. Lowe, Drawings
Repairs Expense
Cash
Unearned Revenue
Cash
Supplies
Accounts Receivable
Unearned Revenue
Accounts Payable
L. Lowe, Drawings
Insurance Expense
Prepaid Insurance
Equipment
Service Revenue
Repairs Expense
Interest Expense
Interest Payable
L. Lowe, Capital
Correct entry:
L. Lowe, Drawings
Interest Payable
Interest Expense
L. Lowe, Capital
Supplies
Repairs Expense
Unearned Revenue
Accounts Payable
Cash
Service Revenue
Accounts Receivable
Prepaid Insurance
Insurance Expense
Equipment
Service Revenue
Cash
Insurance Expense
Unearned Revenue
Interest Payable
Accounts Payable
L. Lowe, Capital
Accounts Receivable
Prepaid Insurance
Repairs Expense
Equipment
Supplies
Interest Expense
L. Lowe, Drawings
Account Titles and Explantion | Debit | Credit | |
1 | Reversing incorrect entry: | ||
Service revenue | 570 | ||
Cash | 570 | ||
Correct entry: | |||
Unearned revenue | 570 | ||
Service revenue | 570 | ||
2 | Reversing incorrect entry: | ||
Cash | 1070 | ||
Accounts receivable | 1070 | ||
Correct entry: | |||
Cash | 1070 | ||
Accounts receivable | 1070 | ||
3 | Reversing incorrect entry: | ||
Insurance expense | 490 | ||
Prepaid insurance | 490 | ||
Correct entry: | |||
Prepaid insurance | 490 | ||
Cash | 490 | ||
4 | Reversing incorrect entry: | ||
Accounts payable | 580 | ||
Equipment | 580 | ||
Correct entry: | |||
Supplies | 580 | ||
Accounts payable | 580 | ||
5 | Reversing incorrect entry: | ||
Interest payable | 560 | ||
Interest expense | 560 | ||
Correct entry: | |||
Interest expense ($5600 x 10% x 1/12) | 46.67 | ||
Interest payable | 46.67 | ||
6 | Reversing incorrect entry: | ||
Cash | 1140 | ||
L. Lowe, Capital | 1140 | ||
Correct entry: | |||
L. Lowe, Drawings | 1140 | ||
Cash | 1140 | ||
7 | Reversing incorrect entry: | ||
Cash | 440 | ||
Repairs expense | 440 | ||
Correct entry: | |||
Equipment | 440 | ||
Accounts payable | 440 |
Note: The correct entry for transaction # 5 is rounded off to 2 decimal places in absence of any instructions regarding the same. Kindly round off as required.