Question

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.

Answer 1

Answer:

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