Question

Katie Long owns and operates KL Company. Transactions for the month of March have been posted to the T accounts. An intern has prepared a trial balance from the T accounts, but there seem to be some errors.

Required:

1.

In the Transactions panel, descriptions of the transactions for the month of March are provided. Each of the transactions in the Transactions panel has been posted to the T accounts. Referring to the T accounts, select the date on which each transaction occurred, enter the amount of the transaction, and select the account to debit and credit.

2.

The trial balance prepared by the intern can be found in the Trial Balance: Unequal Totals panel. The intern is puzzled by the unequal totals. Prepare a corrected trial balance on the Trial Balance: Correct panel.

3.

Compare the trial balance prepared by the intern (Trial Balance: Unequal Totals) to the trial balance that you prepared (Trial Balance: Correct). Use the table provided in the Errors in Trial Balance panel to select the accounts for each type of error.

4.

The intern is puzzled and asks “Are you sure the accounting equation is still in balance?” Using the corrected trial balance you prepared, prove that the accounting equation is in balance. Still puzzled, the intern asks “Why do none of the amounts in the accounting equation equal the totals on the trial balance?” Explain.

Cash
3/1	18,400.00	3/3	2,600.00
3/25	7,725.00	3/27	1,200.00
3/30	7,825.00	3/29	3,625.00
		3/31	1,975.00

Accounts Receivable
3/18	9,875.00	3/30	7,825.00

Supplies
3/7	1,500.00

Equipment
3/2	18,000.00

Accounts Payable
3/27	1,200.00	3/7	1,500.00

Notes Payable
		3/2	18,000.00

Katie Long, Capital
		3/1	18,400.00

Katie Long, Drawing
3/31	1,975.00

Fees Earned
		3/18	9,875.00
		3/25	7,725.00

Rent Expense
3/3	2,600.00

Wages Expense

3/29

3,625.00

Descriptions of the transactions for the month of March are provided in the table below. Each of the transactions below has been posted to the T accounts. Referring to the T accounts, select the date on which each transaction occurred, enter the amount of the transaction, and select the account to debit and credit.

Transaction	Date	Amount	Debit	Credit
Paid wages.
Paid rent for April.
Purchased equipment, giving a note payable for the purchase price.
Received cash from customers on account.
Katie Long, owner of KL Co., contributed cash to the business.
Purchased supplies on account.
Recorded fees earned on account.
Received cash for fees earned.
Recorded owner's withdrawal.
Paid creditors on account.

Trial Balance: Unequal Totals

The intern has prepared the following trial balance for the month of March.

KL Company

UNADJUSTED TRIAL BALANCE

March 31, 20--

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	12,250.00
2	Accounts Receivable		2,050.00
3	Supplies	5,100.00
4	Equipment	18,000.00
5	Accounts Payable	300.00
6	Notes Payable		18,000.00
7	Katie Long, Capital		18,400.00
8	Katie Long, Drawing		1,975.00
9	Fees Earned		2,150.00
10	Rent Expense	2,600.00
11	Wages Expense		3,625.00
12	Totals	38,250.00	46,200.00

Trial Balance: Correct

The trial balance prepared by the intern can be found in the Trial Balance: Unequal Totals panel. The intern is puzzled by the unequal totals. Prepare a corrected trial balance.

KL Company

UNADJUSTED TRIAL BALANCE

March 31, 20--

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash
2	Accounts Receivable
3	Supplies
4	Equipment
5	Accounts Payable
6	Notes Payable
7	Katie Long, Capital
8	Katie Long, Drawing
9	Fees Earned
10	Rent Expense
11	Wages Expense
12	Totals

Errors in Trial Balance

Compare the trial balance prepared by the intern (Trial Balance: Unequal Totals) to the trial balance that you prepared (Trial Balance: Correct). In the following table, select the accounts for each type of error. Not all accounts contain errors.

Error Type	Cash	Accounts	Supplies	Equipment	Accounts	Notes	Katie Long,	Katie Long,	Fees	Rent	Wages
		Receivable			Payable	Payable	Capital	Drawing	Earned	Expense	Expense
Transposition
Incorrectly reported as a debit
Incorrectly reported as a credit
Balance calculated incorrectly

Accounting Equation

The intern is puzzled and asks “Are you sure the accounting equation is still in balance?” Using the corrected trial balance you prepared, prove that the accounting equation is in balance.

Assets	=	Liabilities	+	Owner’s Equity
	=		+

Still puzzled, the intern asks “Why do none of the amounts in the accounting equation equal the totals on the trial balance?” Check all that apply.

This is because the revenue and expense accounts are part of the owner’s equity element. The accounts with debit balances should be part of the total assets.

You point out the total of the assets, liabilities and owner’s equity is equal to the sum of the debit and credit totals in the trial balance.

The accounts that make up the total for owner’s equity have a mix of debit and credit balances.

The accounts with debit balances are not all classified in the same element of the accounting equation. For example, not all accounts with debit balances are assets.

The accounts with credit balances are not all classified in the same element of the accounting equation. For example, not all accounts with credit balances are liabilities.

Answer 1