Question

The trial balance of Blues Traveler Corporation does not balance.

Debit Credit
Cash $5,912
Accounts Receivable 5,240
Supplies 2,967
Equipment 6,100
Accounts Payable $7,044
Common Stock 8,000
Retained Earnings 2,000
Service Revenue 5,200
Office Expense 4,320
$24,539 $22,244

An examination of the ledger shows these errors.

1. Cash received from a customer on account was recorded (both debit and credit) as $1,790 instead of $2,060.
2. The purchase on account of a computer costing $3,088 was recorded as a debit to Office Expense and a credit to Accounts Payable.
3. Services were performed on account for a client, $2,460, for which Accounts Receivable was debited $2,460 and Service Revenue was credited $435.
4. A payment of $305 for telephone charges was entered as a debit to Office Expense and a debit to Cash.
5. The Service Revenue account was totaled at $5,410 instead of $5,490.

Required:
From this information prepare a corrected trial balance.

Answer 1

Blues Traveler Corporation

Adjusted Trial Balance

Accounts Titles Debit Credit

Cash $5,572

Accounts Receivable 4,970

Supplies 2,967

Equipment 9,188

Accounts Payable $7,044

Common Stock 8,000

Retained Earnings 2,000

Service Revenue 7,305

Office Expense 1,232

Suspense 420

Totals $24,349 $24,349

Step-by-step explanation:

Unadjusted Closing Trial Balance

Accounts Titles Debit Credit

Cash $5,912

Accounts Receivable 5,240

Supplies 2,967

Equipment 6,100

Accounts Payable $7,044

Common Stock 8,000

Retained Earnings 2,000

Service Revenue 5,200

Office Expense 4,320

Totals $24,539 $22,244

Correction of errors:

1. Understatement of cash received by $270

This will increase Cash by $270 and Accounts Receivable will be reduced by $270

Debit Cash $270

Credit Accounts Receivable $270

To correct the error above.

2. This is error of commission:

Office expenses are overstated and Equipment understated by $3,088 respectively.

Debit Equipment $3,088

Credit Office expense $3,088

To correct the error.

3. Service Revenue will be increased by $2,025 ($2,460 - $435)

4. Cash will be reduced by $610 ($305 * 2)

5. Service Revenue will be increased by $80 ($5,490 - $5,410).

Cash:

As per Trial Balance $5,912

1. Accounts receivable 270

4, Reduction (610)

Adjusted balance $5,572

Accounts Receivable

As per Trial Balance $5,240

1. Cash (270)

Adjusted balance $4,970

Equipment:

As per Trial Balance $6,100

2. Office expenses 3,088

Adjusted balance $9,188

Office Expenses:

As per Trial Balance $4,320

2. Equipment (3,088)

Adjusted balance $1,232

Service Revenue

As per Trial balance $5,200

3. addition 2,025

5. addition 80

Adjusted balance $7,305