Question

Question 2 View Policies Current Attempt in Progress Wildhorse Company discovered the following errors made in January 2020. 1. Apayment of Salaries and Wages Expense of $300 was debited to Equipment and credited to Cash, both for $300. 2. A collection of $5,400 from a client on account was debited to Cash $540 and credited to Service Revenue $540. 3. The purchase of equipment on account for $400 was debited to Equipment $650 and credited to Accounts Payable $650. Correct the errors by reversing the incorrect entry and preparing the correct entry. (Credit account titles are automatically indented when amount is No. Account Titles and Explanation Debit Credit o em ê a $ OORWXW9

Correct the errors by reversing the incorrect entry and preparing the correct entry.

Answer 1

Debit Credit

Reversal entry

1. Cash a/c 300 To euipment a/c 300

Correct entry

Wages and salaries a/c. 300 To cash a/c. 300

Explanation: Any expenses should be debited to an asset only when they are incurred for that particular asset at the time of it's manufacturing or before it is put into use after purchase.

2.cash a/c. . 4860

Service revenue a/c. 540

To account payable a/c. 5400

Explanation: Here service revenue is credited mistakenly. So to reverse this, it should be debited with the same amount credited. Since it is a liability, the amount should be credited with the amount taken in the name of that creditor

3.accounts payable a/c 250

To equipment a/c. 250

Explanation: Here the equipment is debited with an extra amount than the original purchase cost. So the asset value in books will be high and as well as of account payable. So to nullify this, the entry shall be reversed with such an extra amount.