Question

Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2016, follows:

Elite Realty

UNADJUSTED TRIAL BALANCE

March 31, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	26,000.00
2	Accounts Receivable	62,000.00
3	Prepaid Insurance	3,000.00
4	Office Supplies	1,600.00
5	Land
6	Accounts Payable		13,800.00
7	Unearned Rent
8	Notes Payable
9	Common Stock		10,000.00
10	Retained Earnings		36,300.00
11	Dividends	1,700.00
12	Fees Earned		233,900.00
13	Salary and Commission Expense	146,800.00
14	Rent Expense	28,000.00
15	Advertising Expense	16,600.00
16	Automobile Expense	4,200.00
17	Miscellaneous Expense	4,100.00
18	Totals	294,000.00	294,000.00

The following business transactions were completed by Elite Realty during April 2016. Enter the transactions through the 23rd on Page 18 of the two-column journal:

Apr.	1	Paid rent on office for month, $4,500.
	2	Purchased office supplies on account, $2,400.
	5	Paid insurance premiums, $5,600.
	10	Received cash from clients on account, $52,600.
	15	Purchased land for a future building site for $193,500, paying $23,000 in cash and giving a note payable for the remainder.
	17	Paid creditors on account, $5,800
	20	Returned a portion of the office supplies purchased on April 2, receiving full credit for their cost, $350.
	23	Paid advertising expense, $4,200.

Enter the remaining transactions on Page 19 of the two-column journal:

Apr.	27	Discovered an error in computing a commission; received cash from the salesperson for the overpayment, $3,000.
	28	Paid automobile expense, $1,500.
	29	Paid miscellaneous expenses, $1,200.
	30	Recorded revenue earned and billed to clients during the month, $57,000.
	30	Paid salaries and commissions for the month, $14,700.
	30	Paid dividends, $4,000.
	30	Land purchased on April 15 used by local merchants association as a parking lot in May and June, during a street rebuilding program; received advance payment of $9,800.

Required:
1.	Record the April 1, 2016, balance of each account in the appropriate balance column of a four-column account, type Balance in the item section, and select a check mark in the Posting Reference column.
2.	Journalize the transactions for April in a two-column journal beginning on Page 18. Refer to the Chart of Accounts for exact wording of account titles.
3.	Post to the ledger, extending the account balance to the appropriate balance column after each posting. Post in chronological order. For transactions occurring on the same day, post in the order presented in the instructions. Insert the appropriate posting references in both the journal and the ledger as each item is posted.
4.	Prepare an unadjusted trial balance of the ledger as of April 30, 2016.
5.	Assume that the April 30 transaction for salaries and commissions should have been $17,400. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry on April 30. Use page 20. (Note: You will not be required to post this entry to the ledger at this time.) (c) Is this error a transposition or slide?

Stuck on 3-5

Answer 1

Part 3)

The ledger accounts are prepared as below:

Cash
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				26,000
	1				4,500	21,500
	5				5,600	15,900
	10			52,600		68,500
	15				23,000	45,500
	17				5,800	39,700
	23				4,200	35,500
	27			3,000		38,500
	28				1,500	37,000
	29				1,200	35,800
	30				14,700	21,100
	30				4,000	17,100
	30			9,800		26,900

_____

Accounts Receivables
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				62,000
	10				52,600	9,400
	30			57,000		66,400

_____

Prepaid Insurance
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				3,000
	5			5,600		8,600

_____

Office Supplies
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				1,600
	2			2,400		4,000
	20				350	3,650

_____

Land
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	15			193,500		193,500

_____

Accounts Payable
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance					13,800
	2				2,400		16,200
	17			5,800			10,400
	20			350			10,050

_____

Unearned Rent
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	30				9,800		9,800

_____

Notes Payable
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	15				170,500		170,500

_____

Common Stock
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance					10,000

_____

Retained Earnings
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance					36,300

_____

Dividends
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				1,700
	30			4,000		5,700

_____

Fees Earned
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance					233,900
	30				57,000		290,900

_____

Salary and Commission Expense
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				146,800
	27				3,000	143,800
	30			14,700		158,500

_____

Rent Expense
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				28,000
	1			4,500		32,500

_____

Advertising Expense
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				16,600
	23			4,200		20,800

_____

Automobile Expense
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				4,200
	28			1,500		5,700

_____

Miscellaneous Expense
						Balance
Date		Item	Post. Ref.	Debit	Credit	Debit	Credit
2016
Apr.	1	Balance				4,100
	29			1,200		5,300

_____

Part 4)

The unadjusted trial balance is prepared as below:

Elite Realty
Unadjusted Trial Balance
April 30 2016
	Debit	Credit
Cash	26,900
Accounts Receivable	66,400
Prepaid Insurance	8,600
Office Supplies	3,650
Land	193,500
Accounts Payable		10,050
Unearned Rent		9,800
Notes Payable		170,500
Common Stock		10,000
Retained Earnings		36,300
Dividends	5,700
Fees Earned		290,900
Salary and Commission Expense	158,500
Rent Expense	32,500
Advertising Expense	20,800
Automobile Expense	5,700
Miscellaneous Expense	5,300
Total	$527,550	$527,550

_____

Part 5)

a) The unadjusted trial balance matched between the incorrect entry had a double entry effect which resulted in equal impact on the debit and credit balances by decreasing cash account balance and increasing salary and commission expense account balance (by the same amount of $14,700).

_____

b) The correcting entry is provided as below:

Date	Account Titles	Debit	Credit
30-04-2016	Salary and Commission Expense (17,400 - 14,700)	$2,700
	Cash		$2,700

_____

c) This error is classified as "transposition". This type of error results from data entry when two digits (either inividually or as a part of a large number) are reversed/incorrectly posted or positioned. In the given case, the digits 4 and 7 were incorrectly positioned at the time of punching/recording the numbers in financials.