Question

Home Team Corporation recently hired Steve Willits as its bookkeeper. Mr. Willits is somewhat inexperienced and has made numerous errors recording daily business transactions. Indicate the effects of the errors described as follows on each of the financial statement elements shown in the column headings. Use the following symbols: O for overstated, U for understated, and NE for no effect.

Error Net Income Total Assets Total Owners'
Liabilties Equity
Recorded the issuance of capital stock by
debiting Capital Stock and crediting Cash.
Recorded the declaration and payment of
a dividend by debiting Interest Expense
and crediting Cash.
Recorded the payment of an account
payable by debiting Cash and crediting
Service Revenue.
Recorded the collection of an outstanding
account receivable by debiting Cash and
crediting Accounts Payable.
Recorded client billings on account by
debiting Service Revenue and crediting Cash.
Recorded the cash purchase of land by
debiting Cash and crediting Land.
Recorded the purchase of a building on account
by debiting Rent Expense and crediting Capital Stock.

Answer 1

Recorded the issuance of capital stock by debiting Capital Stock and crediting Cash.

Net Income Total Assets Total Liabilities Owners' Equity

NE U NE U

Recorded the declaration and payment of a dividend by debiting Interest Expense and crediting Cash.

Net Income Total Assets Total Liabilities Owners' Equity

U NE NE U

Recorded the payment of an account payable by debiting Cash and crediting Service Revenue.

Net Income Total Assets Total Liabilities Owners' Equity

O O O O

Recorded the collection of an outstanding account receivable by debiting Cash and crediting Accounts Payable.

Net Income Total Assets Total Liabilities Owners' Equity

NE O O NE

Recorded client billings on account by debiting Service Revenue and crediting Cash.

Net Income Total Assets Total Liabilities Owners' Equity

U U NE U

Recorded the cash purchase of land by debiting Cash and crediting Land.

Net Income Total Assets Total Liabilities Owners' Equity

NE NE NE NE

Recorded the purchase of a building on account by debiting Rent Expense and crediting Capital Stock.

Net Income Total Assets Total Liabilities Owners' Equity

U U U NE