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SOLUTION
Requirement 2
E2-24, cont.
Requirements 1 & 2
E2-24, cont.
E2-24, cont.
Requirement 3
E2-25 Analyzing accounting errors
Learning Objective 4
Courtney Meehan has trouble keeping her debits and credits equal. During a recent month,
Courtney made the following accounting errors:
a. In preparing the trial balance, Courtney omitted a $5,000 Notes Payable. The debit to Cash
was correct.
b. Courtney posted a $1,000 Utilities Expense as $100. The credit to Cash was correct.
c. In recording a $600 payment on account, Courtney debited Furniture instead of Accounts
Payable.
d. In journalizing a receipt of cash for service revenue, Courtney debited Cash for $50 instead
of the correct amount of $500. The credit was correct.
e. Courtney recorded a $210 purchase of office supplies on account by debiting Office Supplies
for $120 and crediting Accounts Payable for $120.
Requirements
1. For each of these errors, state whether total debits equal total credits on the trial balance.
2. Identify each account that has an incorrect balance and the amount and direction of the error
(e.g., “Accounts Receivable $500 too high”).
SOLUTION
Requirements 1 and 2
E2-26 Correcting errors in a trial balance
Learning Objective 4
Total Debits $35,600
The accountant for Countryside Painting Specialists is having a hard time preparing the trial
balance as of November 30, 2018:
Prepare the corrected trial balance as of November 30, 2018. Assume all amounts are correct and
all accounts have normal balances.
SOLUTION
E2-27 Correcting errors in a trial balance
Learning Objective 4
Total Debits $35,300
The following trial balance of Joy McDowell Tutoring Service as of May 31, 2018, does not balance.
Investigation of the accounting records reveals that the bookkeeper:
a. Recorded a $400 cash revenue transaction by debiting Accounts Receivable. The credit entry was
correct.
b. Posted a $2,000 credit to Accounts Payable as $200.
c. Did not record Utilities Expense or the related Utilities Payable in the amount of $300.
d. Understated Common Stock by $100.
Prepare the corrected trial balance as of May 31, 2018, complete with a heading; journal entries are not
required.
SOLUTION
E2-28 Calculating the debt ratio
Learning Objective 5
Total Assets $174,900
John Hart, M.D., reported the following trial balance as of September 30, 2018:
Calculate the debt ratio for John Hart, M.D.
SOLUTION
Debt ratio = Total liabilities / Total assets = $96,195 / $174,900 = 0.55 = 55%
Problems (Group A)
P2-29A Journalizing transactions, posting journal entries to T-accounts, and preparing a
trial balance
Learning Objectives 3, 4
2. Cash Balance $56,050
Vince York practices medicine under the business title Vince York, M.D. During July, the
medical practice completed the following transactions:
Jul. 1 York contributed $63,000 cash to the business in exchange for common stock.
5 Paid monthly rent on medical equipment, $510.
9 Paid $23,000 cash to purchase land to be used in operations.
10 Purchased office supplies on account, $1,600.
19 Borrowed $22,000 from the bank for business use.
22 Paid $1,100 on account.
28 The business received a bill for advertising in the daily newspaper to be paid in August, $240.
31 Revenues earned during the month included $6,400 cash and $6,000 on account.
31 Paid employees’ salaries $2,200, office rent $1,900, and utilities $560. Record as a compound entry.
31 The business received $1,120 for medical screening services to be performed next month.
31 Paid cash dividends of $7,200.
The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Land;
Accounts Payable; Advertising Payable; Unearned Revenue; Notes Payable; Common Stock;
Dividends; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; and
Advertising Expense.
Requirements
1. Journalize each transaction. Explanations are not required.
2. Post the journal entries to the T-accounts, using transaction dates as posting references in the
ledger accounts. Label the balance of each account Bal.
3. Prepare the trial balance of Vince York, M.D., as of July 31, 2018.
