At Creighton Company, the following errors were discovered after the transactions had been journalized and posted. 1. A collection on account from a customer for $920 was recorded as a debit to Cash $920 and a credit to Service Revenue $920.2. The purchase of store supplies on account for $1,180 was recorded as a debit to Supplies $1,520 and a credit to Accounts Payable $1,520.

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Business

Domino

8 February, 01:32

At Creighton Company, the following errors were discovered after the transactions had been journalized and posted. 1. A collection on account from a customer for $920 was recorded as a debit to Cash $920 and a credit to Service Revenue $920.2. The purchase of store supplies on account for $1,180 was recorded as a debit to Supplies $1,520 and a credit to Accounts Payable $1,520.

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Bird · Answer 1

The correction entries shall be as follows,

1. Service Revenue Dr. $ 920

Customer Account Cr. $ 920

2. Store Purchases Dr. $1,180

Accounts Payable Dr.$340

Supplies Account Cr. $ 1,520

Explanation:

1. The service revenue account was overstated and customer account understated. therefore by debiting service revenue and by crediting customer account, both have been restated at their actual position.

2. The accounts payable was overstated by $ 340 (1,180-1520). it is rectified by debiting with $ 340. Whereas the supplies account was wrongly debited therefore that impact of $1,520 reversed and actual store purchases debited with actual amount of $1,180