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An error that overstates the ending inventory will also cause net income for the period
to be overstated.
Answer:
On March 8, Black Candy Company bought supplies on account from the Arcade Fire
Company for $550. Black Candy Company incorrectly debited Equipment for $500 and
credited Accounts Payable for $500. The entries have been posted to the ledger. the
correcting entry should be:
Answer:
The responsibility for keeping the records for an asset should be separate from the
physical custody of that asset.
Answer:
Inventory is classified as a current asset in a classified balance sheet.
Answer:
Accounting information is used only by external users with a financial interest in a
business enterprise.
Answer:
An examination of the accounts of Savage Company for the month of June revealed the
following errors after the transactions were journalized and posted.
1> A check for $800 from R. Wright, a customer on account, was debited to Cash $800
and credited to Service Revenue, $800.
2> A payment for Advertising Expense costing $630 was debited to Utilities Expense,
$360 and credited to Cash $360.
3> A bill for $850 for Supplies purchased on account was debited to Equipment, $580
and credited to Accounts Payable $580.
Instructions
Prepare correcting entries for each of the above assuming the erroneous entries are not
reversed. Explain how the transaction as originally recorded affected net income for the
month of June.
Answer:
