This exercise will illustrate how to correct errors made in the recording process.

The following errors were discovered in the books of the Cool Way AC Repair Shop.

  1. A cash payment of $120 for repairs on a typewriter was recorded by a debit to Office Equipment and a credit to Cash.
  2. A cash payment of $70 for office supplies was recorded by a debit to Office Supplies and a credit to Accounts Payable.
  3. The declaration and distribution of a cash dividend was recorded by a debit to Salaries and Wages Expense and a credit to Cash for $700.
  4. A cash payment of $150 for an ad appearing in Sunday”s edition of the local newspaper was recorded by a debit to Utilities Expense and a credit to Cash for $150.
  5. A $500 cash receipt from a customer on account was recorded by a debit to Cash for $50 and a credit to Service Revenue for $50.
  6. The first interest payment made this accounting period (on a note payable) was for $1,000, which included $300 of interest accrued at the end of the last accounting period. The payment was recorded by a debit to Interest Expense for $1,000 and a credit to Cash for $1,000. (No reversing entries were made at the beginning of this accounting period.)
  7. A $300 cash sale of services was recorded by a debit to Accounts Receivable for $300 and a credit to Service Revenue for $300.
  8. A cash payment of $2,000 for some new tools was recorded by a debit to Tools for $200 and a credit to Cash for $200.

Instructions

Prepare an analysis of each error showing the

(a) incorrect entry,

(b) correct entry, and

(c) correcting entry.