Question

The following trial balance of Pronghorn Landowska does not balance. Your review of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated $92. (c) A transposition error was made in Accounts Receivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are $2,750 and $6,690, respectively. (d) A debit posting to Advertising Expense of $281 was omitted. (e) A $1,530 cash drawing by the owner was debited to Owner’s Capital and credited to Cash.

PRONGHORN LANDOWSKA TRIAL BALANCE APRIL 30, 2017
		Debit				Credit
Cash			$5,155
Accounts Receivable			2,570
Prepaid Insurance			640
Equipment							$7,910
Accounts Payable							4,620
Property Tax Payable			563
Owner’s Capital							11,660
Service Revenue			6,960
Salaries and Wages Expense			4,540
Advertising Expense			1,107
Property Tax Expense							874
			$21,535				$25,064

Answer 1

The revised trial balance is as follows:

1. There won't be any change in cash as cash is correctly credited when owner has withdrawn it.

2. Accounts Receivable amount is corrected by taking $2,750

3. Prepaid Insurance balance is increased because of the understatement of the debit balance by $92, hence it is increased from $640 to $732 by adding up $92.

4. Equipment is an asset to the company and hence it should have debit balance.

5. Accounts Payable balance is decreased because of the understatement of the debit balance by $92, hence it is decreased from $4,620 to $4,528.

6. Property Tax Payable is a liability to the company hence it should have credit balance.

7. Owners' capital is to increased by the drawings amount of $1,530 hence it is increased from $11,660 to $13,190 by adding $1,530.

8. Service Revenue is revenue to the company which has credit balance and not debit balance.

9. Salaries and wages expense has no change.

10. Advertising expense is to be increased by $281 which is omitted earlier. Hence it is increased to $1,388 from $1,107 by adding $281.

11. Property Tax expense is an expense which has debit balance and it is to be increased because of the understatement of the debit amount by $92. Hence it is increased from $874 to $966 and is to be presented on the debit side of the trial balance.