An Examination of the Accounts of Kenny Company for the Month

question 125

Essay

An examination of the accounts of Kenny Company for the month of June revealed the following errors after the transactions were journalized and posted:
1. A cheque for $750 from R. Chang, a customer on account, was debited to Cash $750 and credited to Service Revenue, $750.
2. A payment for Advertising Expense costing $520 was debited to Utilities Expense, $250 and credited to Cash $250.
3. A bill for $640 for Office Supplies purchased on account was debited to Office Equipment, $460 and credited to Accounts Payable $460.
4. A payment on account from a customer was credited to cash $450 and debited to Accounts Receivable.
5. A new computer purchased for $5,500 was recorded as a debit to Cash of $5,500 and a credit to Repairs and Maintenance Expense of $5,500.
Instructions
Prepare correcting entries for each of the above, assuming the erroneous entries are not reversed. Explain how the transaction as originally recorded affected profit for the month of June.

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Definitions:

Marginal Tax Rate

The tax rate paid on an additional dollar of income.

State And Local Taxes

Taxes imposed by individual states and local governments in the U.S. on income, property, sales, and other activities to fund public services.

Predominantly Regressive

Describing a situation or policy where the burden disproportionately affects those with lower incomes, making it effectively regressive in impact.

Inelastic Demand

A scenario in which the need for a product remains largely unaffected despite variations in its price.