P2-4A, Prepare a correct trial balance
The trial balance of Avtar Sandhu Co. shown below does not balance.
Debit Credit
Cash $3,340
Accounts Receivable $2,812
Supplies $1,200
Equipment $2,600
Accounts Payable $3,666
Unearned Service Revenue $1,100
Owner’s Capital $8,000
Owner’s Drawings $800
Service Revenue $2,480
Salaries and Wages Expense $3,200
Utilities Expense $810
$12,522 $17,486
Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger
and journal reveals the following errors.
1. Cash received from a customer in payment of its account was debited for $580, and Accounts Receivable
was credited for the same account. The actual collection was for $850.
2. The purchase of a computer on account for $710 was recorded as a debit to Supplies for $710 and a credit
to Accounts Payable for $710.
3. Services were performed on account for a client for $980. Accounts Receivable was debited for $980, and
Service Revenue was credited for $98.
4. A debit posting to Salaries and Wages Expense of $700 was omitted.
5. A payment of a balance due for $306 was credited to Cash for $306 and credited to Accounts
Payable for $360.
6. The withdrawal of $600 cash for Sandhu’s personal use was debited to Salaries and Wages Expense for $600
and credited to Cash for $600.
Instructions:
Prepare a corrected trial balance. (Hint: It helps to prepare the correct journal entry for the transactions
described and compare it to the mistake made.)
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Debit Credit
Cash Value
Accounts Receivable Value
Supplies Value
Equipment Value
Accounts Payable Value
Unearned Service Revenue Value
Owner’s Capital Value
Owner’s Drawings Value
Service Revenue Value
June 30, 2017
AVTAR SANDHU
Trial Balance
June 30, 2017
AVTAR SANDHU CO.
Trial Balance
Salaries and Wages Expense Value
Utilities Expense Value
? ?
After you have completed the requirements of P2-4A, consider this additional question.
1. Avtar Sandhu Co. determined that the trial balance was missing the cash receipts for services provided for the month.
The cash receipts totaled $2,640. What would be the new adjusted trial balance for Avtar Sandhu?
P2-4A Solution
Debit Credit
Cash ($3,340 + $270) 3,610$
Accounts Receivable ($2,812 -$270) 2,542
Supplies ($1,200 – $710) 490
Owner’s Drawings ($800 + $600) 1,400
Service Revenue ($2,480 + $882) 3,362
AVTAR SANDHU CO
Trial Balance
June 30, 2017
Salaries and Wages Expense
P2-4A Solution to additional question
1. Avtar Sandhu Co. determined that the trial balance was missing the cash receipts for services provided
for the month. The cash receipts totaled $2,640. What would be the new adjusted trial balance for Avtar Sandhu?
Debit Credit
Cash ($3,340 + $270 + $2,640)6,250$
Accounts Receivable ($2,812 -$270) 2,542
Owner’s Drawings ($800 + $600) 1,400
Service Revenue ($2,480 + $882 + $2,640) 6,002
3,300
AVTAR SANDHU CO
Trial Balance
June 30, 2017
Salaries and Wages Expense
($3,200 +700 – $600)
CC2 – Cookie Creations: The Entrepreneurial Journey
(This is a continuation of the Cookie creations problem from Chapter 1.)
After researching the different forms of business organization, Natalie Koebel decides to operate “Cookie Creations” as a
proprietorship. She then starts the process of getting the business running. In November 2016, the following activities took
place.
Nov 8
Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.
8 She opens a bank account under the name “Cookie Creations” and transfers $500 from her personal account
to the new account.
11 Natalie pays $65 for advertising.
13 She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125 cash.
(Hint: Use Supllies account.)
14 Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an
excellent top-of-the-line food processor and mixer that orginally cost her $750. Natalie decides to start using it only
in her new business. She estimates that the equipment is currently worth $300. She invests the equipment in the
business.
16 Natalie realizes that her initial cash investment is not enough. Her grandmother lends her $2,000 cash, for which
Natalie signs a note payable in the name of the business. Natalie deposits the money in the business bank account.
(Hint: The note does not have to be repaid for 24 months. As a result, the note payable should be reported in the
accounts as the last liability and also on the balance sheet as the last liability.)
17 She buys more baking equipment for $900 cash.
20 She teaches her first class and collects $125 cash.
25 Natalie books a second class for December 4 for $150. She receives $30 in advance as a downpayment.
30 Natalie pays $1,320 for a one-year insurance policy that will expire on December 1, 2017.
Instructions
(a) Prepare journal entries to record the November transactions.
(b) Post the journal entries to general ledger accounts.
(c ) Prepare a trial balance at November 30.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare journal entries to record the November transactions.
Date Debit Credit
Nov. 8 Value Value
11 Value Value
13 Value Value
14 Value Value
16 Value Value
17 Value Value
Account Title
Account Title
Account Title
GENERAL JOURNAL J1
Account Titles and Explanation
Account Title
Account Title
Account Title
Account Title
Account Title
Account Title
Account Title
Account Title
Account Title
20 Value Value
25 Value Value
30 Value Value
(b) Post the journal entries to general ledger accounts.
Date Explanation Ref. Debit Credit Balance
Nov. 8 Ref. Value Value
11 Ref. Value ?
13 Ref. Value ?
16 Ref. Value ?
17 Ref. Value ?
20 Ref. Value ?
25 Ref. Value ?
30 Ref. Value ?
Date Explanation Ref. Debit Credit Balance
Nov. 13 Ref. Value Value
Date Explanation Ref. Debit Credit Balance
Nov. 30 Ref. Value Value
Date Explanation Ref. Debit Credit Balance
Nov. 14 Ref. Value Value
17 Ref. Value ?
Date Explanation Ref. Debit Credit Balance
Nov. 25 Ref. Value Value
Date Explanation Ref. Debit Credit Balance
Nov. 16 Ref. Value Value
Account Title
Equipment
Account Title
Account Title
Account Title
Account Title
Account Title
Unearned Service Revenue
Notes Payable
Cash
Supplies
Prepaid Insurance
Date Explanation Ref. Debit Credit Balance
Nov. 8 Ref. Value Value
14 Ref. Value ?
Date Explanation Ref. Debit Credit Balance
Nov 20 Ref. Value Value
Date Explanation Ref. Debit Credit Balance
Nov. 11 Ref. Value Value
(c ) Prepare a trial balance at November 30.
Account Debit Credit
Cash Value
Supplies Value
Prepaid Insurance Value
Equipment Value
Unearned Service Revenue Value
Notes Payable Value
Owner’s Capital Value
Service Revenue Value
Advertising Expense Value
Totals ? ?
After you have completed the requirements of CC2, consider this additional question.
1. Assume that on November 8, Natalie transferred $800 cash to her business account and
on November 25, she received full payment of $150 for the December 4th class. Show the
impact of these changes on the journal entries, general ledger and the trial balance.
COOKIE CREATIONS
Trial Balance
November 30, 2016
Advertising Expense
Owner’s Capital
Service Revenue
Equipment
Cash
Cash
Service Revenue
Cash
CC2 Solution
(a) Prepare journal entries to record the November transactions.
Date Debit Credit
Nov. 8 500 500
14 300 300
16 2,000 2,000
25 30 30
Note: No entry required for cashing U.S. Savings Bonds – this is a personal transaction.
(b) Post the journal entries to general ledger accounts.
Date Explanation Ref. Debit Credit Balance
Cash
Unearned Service Revenue
Cash
Notes Payable
GENERAL JOURNAL J1
Account Titles and Explanation
Cash
Owner’s Capital
Equipment
Owner’s Capital
Cash
Advertising Expense
Cash
Cash
Nov. 8 J1 500 500
11 J1 65 435
13 J1 125 310
16 J1 2,000 2,310
Date Explanation Ref. Debit Credit Balance
Nov. 13 J1 125 125
Date Explanation Ref. Debit Credit Balance
Date Explanation Ref. Debit Credit Balance
Nov. 14 J1 300 300
17 J1 900 1,200
Date Explanation Ref. Debit Credit Balance
Date Explanation Ref. Debit Credit Balance
Nov. 16 J1 2,000 2,000
Date Explanation Ref. Debit Credit Balance
Unearned Service Revenue
Notes Payable
Owner’s Capital
Equipment
Supplies
Prepaid Insurance
Date Explanation Ref. Debit Credit Balance
Nov 20 J1 125 125
Date Explanation Ref. Debit Credit Balance
(c ) Prepare a trial balance at November 30.
Account Debit Credit
Cash $245
Supplies 125
Prepaid Insurance 1,320
Trial Balance
November 30, 2016
Service Revenue
Advertising Expense
COOKIE CREATIONS
Equipment
Cash
Service Revenue
Prepaid Insurance
Cash
CC2 – Solution to additional question
After you have completed the requirements of CC2, consider this additional question.
1. Assume that on November 8, Natalie transferred $800 cash to her business account and
on November 25, she received full payment of $150 for the December 4th class. Show the
impact of these changes on the journal entries, general ledger and the trial balance.
(a) Prepare journal entries to record the November transactions.
Date Debit Credit
Nov. 8 800 800
14 300 300
16 2,000 2,000
25 150 150
(b) Post the journal entries to general ledger accounts.
Date Explanation Ref. Debit Credit Balance
Cash
Unearned Service Revenue
Cash
Notes Payable
GENERAL JOURNAL J1
Account Titles and Explanation
Cash
Owner’s Capital
Equipment
Owner’s Capital
Cash
Advertising Expense
Cash
Nov. 8 J1 800 800
11 J1 65 735
Date Explanation Ref. Debit Credit Balance
Date Explanation Ref. Debit Credit Balance
Nov. 30 J1 1,320 1,320
Date Explanation Ref. Debit Credit Balance
Date Explanation Ref. Debit Credit Balance
Nov. 25 J1 150 150
Date Explanation Ref. Debit Credit Balance
Nov. 16 J1 2,000 2,000
Date Explanation Ref. Debit Credit Balance
Date Explanation Ref. Debit Credit Balance
Unearned Service Revenue
Notes Payable
Owner’s Capital
Service Revenue
Equipment
Supplies
Prepaid Insurance
Nov 20 J1 125 125
Date Explanation Ref. Debit Credit Balance
Nov. 11 J1 65 65
(c ) Prepare a trial balance at November 30.
Account Debit Credit
Cash $665
Supplies 125
Prepaid Insurance 1,320
Note: Because the note payable is not due for 24 months, it follows Unearned
Service Revenue in the accounts and the trial balance.
Trial Balance
November 30, 2016
Advertising Expense
COOKIE CREATIONS