A. Decide which general journal entries are correct and which ones are incorrect.
B. For each general journal entry that is incorrect, prepare the correcting journal entry.
C. Which of the incorrect journal entries would prevent the trial balance from balancing?
D. What was the correct profit figure for June, assuming the bookkeeper originally had calculated profit to be $4500 after posting all the entries for the month?
E. What was the correct cash at bank balance at 30 June assuming the bookkeeper reported a balance of $5420 after posting all the entries for the month?
Abby Forbes owns and operates Abby’s Pony Club. The club’s main sources of income are riding fees and lesson fees, which are paid on a cash basis. In addition, the club boards a limited number of horses for owners, who are charged monthly for the boarding fees. The club owns six horses, a small riding yard, riding equipment and office equipment. The club employs several stable hands and an office employee, who receive weekly salaries. At the end of the month, accounts are received for advertising, electricity and veterinary services. The other major expense the club incurs is hay and feed for the horses.
Abby’s Pony Club maintains the following general ledger accounts: Cash at Bank; Boarding Accounts Receivable; Hay and Feed Supplies; Horses; Building; Riding Yard; Riding Equipment; Office Equipment; Accounts Payable; Abby Forbes, Capital; Abby Forbes, Drawings; Riding Revenue; Lesson Revenue; Boarding Revenue; Salaries Expense; Advertising Expense; Electricity Expense; Veterinary Fees Expense; and Hay and Feed Expense.
Following the retirement of the club’s accountant, Abby employed an inexperienced bookkeeper who has kept the records for the last month of operations and made 38 entries for the month. Abby is concerned the bookkeeper may have made some errors and has asked you to review the following eight general journal entries. In each case the narration is correct. GST is ignored.
|
General Journal |
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|
Date |
Particulars |
Debit |
Credit |
||
|
2016 |
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|
June 1
|
Cash at Bank Abby Forbes, Capital (Abby invested $30000 cash in the business) |
30000 |
30000 |
||
|
5
|
Hay and Feed Expense Cash at Bank (Purchased supply of hay and feed on account, $3700) |
3700 |
3700 |
||
|
9
|
Riding Equipment Cash at Bank (Purchased office desk for $1600 cash) |
1600 |
1600 |
||
|
10
|
Cash at Bank Lesson Revenue (Received $500 for lesson fees) |
500 |
500 |
||
|
12
|
Cash at Bank Boarding Revenue (Received $1200 for boarding of horses billed last month) |
1200 |
1200 |
||
|
18
|
Salaries Expense Cash at Bank (Issued cheque to Abby for personal expenses) |
700 |
700 |
||
|
20
|
Veterinary Fees Expense Accounts Payable (Received an account for $270 from a veterinarian for services rendered) |
270 |
270 |
||
|
22
|
Cash at Bank Riding Revenue (Received $340 for riding fees) |
340 |
340 |
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