Question

In: Accounting

During a maternity leave of the full-time bookkeeper at a privately owned furniture repair business, a...

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    

Solutions

Expert Solution

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.


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