An Examination of the Accounts of Salvage Company for the Month

question 18

Essay

An examination of the accounts of Salvage Company for the month of June revealed the following errors after the transactions were journalized and posted.
1. A check for $950 from S. Wilde, a customer on account, was debited to Cash $950 and credited to Service Revenue, $950.
2. A payment for Advertising Expense costing $720 was debited to Utilities Expense, $270 and credited to Cash $270.
3. A bill for $950 for Supplies purchased on account was debited to Equipment, $590 and credited to Accounts Payable $590.
Instructions
Prepare correcting entries, with explanations, for each of the above assuming the erroneous entries are not reversed. Explain how the transaction as originally recorded affected net income for the month of June.

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Definitions:

Transform Objects

The act or process of changing the form, appearance, or function of objects, often through creative or imaginative efforts.

Crystallized Intelligence

Represents the facet of intelligence involving the ability to use learned knowledge and experience.

Capital

The wealth, whether in money or assets, that is used or invested to generate more wealth.

Gardner's Theory

Refers to Howard Gardner's theory of multiple intelligences, which proposes that people have different kinds of intelligences, such as linguistic, logical-mathematical, and musical, among others.