Problem 2-4A
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.)
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