Prepare the correct journal entry for the transaction

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Reference no: EM13548713

The trial balance of the Sterling Company shown below does not balance.

STERLING COMPANY

Trial Balance

May 31, 2008


Debit

Credit

Cash

$5,850


Accounts Rcvbl


$2,750

Prepaid Insurance

700


Equipment

8,000


Accounts Payable


4,500

Property Taxes Payable

560


Common Stock


11,700

Service Revenue

6,690


Salaries Revenue

4,200


Advertising Expense


1,100

Property Tax Expense

800



$26,800

$20,050

Your review of the ledger reveals that each account has a normal balance. You also discover the following errors.

(a) The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated $100.

(b) Transposition errors were made in Accounts Receivable and Service Revenue. Based on postings made, the correct balances were $2,570 and $6,960, respectively.

(c) A debit posting to Salaries Expense of $200 was omitted.

(d) A $1,000 cash dividend was debited to Common Stock for $1,000 and credited to Cash for $1,000.

(e) A $520 purchase of supplies on account was debited to Equipment for $520 and credited to Cash for $520.

(f) A cash payment of $450 for advertising was debited to Advertising Expense for $45 and credited to Cash for $45.

(g) A collection from a customer for $210 was debited to Cash for $210 and credited to Accounts Payable for $210.

Instructions:

Prepare a correct trial balance. Note that the chart of accounts includes the following: Dividends, and Supplies. (Hint: It helps to prepare the correct journal entry for the transaction described and compare it to the mistake made.)

Reference no: EM13548713

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