4E - Intermediate Accounting (Kieso)

Question

The following trial balance of Watteau Co. does not balance:

WATTEAU CO. TRIAL BALANCE JUNE 30, 2017
	Debit \(	Credit \)
Cash		\(2,870
Accounts receivable	\)3,231
Supplies	800
Equipment	3,800
Account payable		2,666
Unearned service revenue	1,200
Common stock		6,000
Retained earnings		3,000
Service revenue		2,380
Salaries and wages expenses	3,400
Office expenses	940
	\(13,371	\)16,916

 

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

1. Cash received from the customer on account was debited for \(570, and accounts receivable was credited for the same amount. The actual collection was for \)750.
2. The purchase of a computer printer on account for \(500 was recorded as a debit to Supplies for \)500 and a credit to Accounts Payable for \(500.
3. Services were performed on account for a client for \)890. Accounts receivable was debited for \(890 and service revenue was credited for \)89.
4. A payment of \(65 for telephone charges was recorded as a debit to Office Expense for \)65 and a debit to Cash for \(65.
5. When the unearned service revenue account was reviewed, it was found that service revenue amounting to \)325 was performed prior to June 30 (related to unearned service revenue).
6. A debit posting to salaries and wages expenses of \(670 was omitted.
7. A payment on account for \)206 was credited to cash for \(206 and credit to account payable for \)260.
8. A dividend of \(575 was debited to salaries and wages expenses for \)575 and credit to cash for $575.

Instruction 

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

Step-by-Step Solution

Answer

Both sides of the trial balance total $15,581.

Definition of Trial balance

The summary of ending balances of all the general ledger accounts prepared by the business entity is known as trial balance. It classifies all the general ledger balances on two sides: debit and credit. The main purpose of preparing this summary is to check the arithmetical accuracy. 

Corrected trial balance

Particular	Debit $	Credit $
Cash       $\left(2,870+180-130\right)$	$2,920
Accounts receivable  $\left(3,231-180\right)$	3,051
Supplies                  $\left(800-500\right)$	300
Equipment          $\left(3,800+500\right)$	4,300
Account payable  $\left(2,666-260-206\right)$		$2,200
Unearned service revenue  $\left(1,200-325\right)$		875
Common stock		6,000
Dividends	575
Retained earnings		3,000
Service revenue  $\left(2,380+325+801\right)$		3,506
Salaries and wages expenses $\left(3,400-575+670\right)$	3,495
Office expenses	940
Total	$15,581	$15,581