Question

Ricardo Advertising creates, plans, and handles advertising campaigns in three provinces. Recently, Ricardo had to replace an inexperienced office worker in charge of bookkeeping because of some serious mistakes that had bøen uncovered in the accounting records. You have been hired to review these transactions to determine any corrections that might be necessary. In all cases, the bookkeeper made an accurate description of the transaction but did not correctly record the transaction in the journal.

Requirements

Requirement 1. For each of the preceding entries, indicate the effect of the error on cash, total assets, and net income. The answer for the first transaction has been provided as an example. (If the error has no effect, select) "Correct" and leave the amount cell blank.)

Requirement 2 . What is the correct balance of cash if the balance of cash on the books before correcting the preceding transactions was $ 6,600?

Requirement 3. What is the correct amount of total assets if the total assets on the books before correcting the preceding transactions was $ 27,000?

Requirement 4. What is the correct net income for May If the reported income before correcting the preceding transactions was $ 16,000?

Answer 1

Date	Effect of Cash	Efffect on Total Asset	Effect on Net Incomee
5/1/2020	Understated	$1,700.00	Overstated	$1,700.00	Overstated	$1,700.00
2	Understated	$19,800.00	Understated	$19,800.00	Understated	$19,800.00
5	Correct		Understated	$3,400.00	Understated	$3,400.00
10	Correct		Correct		Correct
16	Correct		Correct		Overstated	$5,400.00
25	Correct		Overstated	$4,000.00	Correct

Computation of Correct Cash Balance
Cash Balance	$6,600.00
Understated Amount for 02/05	$1,700.00
Understated Amount for 05/05	$19,800.00
Corrected Cash Balance	$28,100.00
Computation of Correct Total AssetBalance
Total Asset Balance	$27,000.00
Overstated Amount for 01/05	-$1,700.00
Understated Amount for 02/05	$19,800.00
Understated Amount for 05/05	$3,400.00
Overstated Amount for 25/05	-$4,000.00
Corrected Cash Balance	$44,500.00
Computation of Correct Net Income Balance
Net Income Balance	$16,000.00
Overstated Amount for 01/05	-$1,700.00
Understated Amount for 02/05	$19,800.00
Understated Amount for 05/05	$3,400.00
Overstated Amount for 16/05	-$5,400.00
Corrected Net Income Balance	$32,100.00