Question

Marigold Company discovered the following errors made in January 2022.

1. A payment of Salaries and Wages Expense of $900 was debited to Equipment and credited to Cash, both for $900.
2. A collection of $6,500 from a client on account was debited to Cash $650 and credited to Service Revenue $650.
3. The purchase of equipment on account for $510 was debited to Equipment $150 and credited to Accounts Payable $150.
A. Correct the errors by reversing the incorrect entry and preparing the correct entry.
B. Correct the errors without reversing the incorrect entry.
Account Titles Debit Credit
1. Salaries And Wages Expense 700
Equipment 700
2. Cash 1000
Service Revenue 100
Accounts Receivable 100
3. Equipment 335
Accounts Payable 335

Answer 1

A. Reversals entry

1. Dr Cash 900

Cr Equipment 900

Correct entry

Dr Wages and salaries 900

Cr Cash 900

B.

2. Dr Cash 5850

Dr Service revenue 650

Cr Account payable $6,500

3. Dr Accounts payable 360

Cr Equipment 360

Step-by-step explanation:

A. To Correct the errors by reversing the incorrect entry and Preparation of the correct entry.

Reversals entry

1. Dr Cash 900

Cr Equipment 900

Correct entry

Dr Wages and salaries 900

Cr Cash 900

B. To Correct the errors without reversing the incorrect entry

2. Dr Cash 5850

($6500-650)

Dr Service revenue 650

Cr Account payable $6,500

3. Dr Accounts payable 360

(510-150)

Cr Equipment 360