b. $6,500 credit to Cash Cash is understated by $6,500 Credit Cash is posted twice as two $6,500 credits to Cash. c. $10,900 debit to the Common Stock is Common Dividends account is understated by $10,900 Stock $0 –– debited to Common Dividends is Dividends Stock. understated by $10,900 d. $2,050 debit to Prepaid Prepaid Insurance is Prepaid Insurance is Insurance understated by $2,050 $0 –– posted as a debit to Insurance Insurance Expense is Insurance Expense. Expense overstated by $2,050 e. $38,000 debit to Machinery is Machinery Machinery is posted understated by $38,000 $0 –– Accounts as a debit to Accounts Accounts Payable is Payable Payable. understated by $38,000 f. $5,850 credit to $5,265 Debit Services Services Revenue is Services Revenue is Revenue understated by $5,265 posted as a $585 credit. g. $1,390 debit to Store $1,390 Credit Store Store Supplies is Supplies is not Supplies understated by $1,390 posted. Exercise 2-21 (15 minutes) Overstated, Understated, or Correctly-Stated Amount a. Correctly-stated. The debit column is correctly stated $0 because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance. b. Understated. The credit column is understated by $37,900 $37,900 because Accounts Payable was debited it should have — been credited. c. Correctly-stated. The Automobiles account balance is $0 correctly stated. d. Understated. The Accounts Payable account balance is $37,900 understated by $37,900. It should have been increased (credited) by $18,950 but the posting error decreased (debited) it by $18,950. e. The credit column is $37,900 less than the debit column, or $162,100 in total ($200,000 - $37,900).
b. $6,500 credit to Cash is posted twice as two credits to Cash. $6,500 Credit Cash Cash is understated by $6,500 c. $10,900 debit to the Dividends account is debited to Common Stock. $0 –– Common Stock Dividends Common Stock is understated by $10,900 Dividends is understated by $10,900 d. $2,050 debit to Prepaid Insurance is posted as a debit to Insurance Expense. $0 –– Prepaid Insurance Insurance Expense Prepaid Insurance is understated by $2,050 Insurance Expense is overstated by $2,050 e. $38,000 debit to Machinery is posted as a debit to Accounts Payable. $0 –– Machinery Accounts Payable Machinery is understated by $38,000 Accounts Payable is understated by $38,000 f. $5,850 credit to Services Revenue is posted as a $585 credit. $5,265 Debit Services Revenue Services Revenue is understated by $5,265 g. $1,390 debit to Store Supplies is not posted. $1,390 Credit Store Supplies Store Supplies is understated by $1,390 Exercise 2-21 (15 minutes) Overstated, Understated, or Correctly-Stated Amount a. Correctly-stated. The debit column is correctly stated because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance. $0 b. Understated. The credit column is understated by $37,900 because Accounts Payable was debited — it should have been credited. $37,900 c. Correctly-stated. The Automobiles account balance is correctly stated. $0 d. Understated. The Accounts Payable account balance is understated by $37,900. It should have been increased (credited) by $18,950 but the posting error decreased (debited) it by $18,950. $37,900 e. The credit column is $37,900 less than the debit column, or $162,100 in total ($200,000 - $37,900).
Wild_FA9e_SM_Ch02%20Exercises%20Only.docx