CBD made the following errors in adjusting the accounts at year-end (30 June).

a. Did not accrue $1400 owed to the company by another company renting part of the building as a storage facility. 

b. Did not record $15 000 depreciation on equipment costing $115 000. 

c. Failed to adjust the Unearned fee revenue account to reflect that $1500 was earned by the end of the year. 

d. Recorded a full year of accrued interest expense on a $17 000, 9 per cent loan payable that has been outstanding only since 31 May. 

e. Failed to adjust Prepaid insurance to reflect that $650 of insurance coverage has been used.

Required:

1. Using the following headings, indicate the effect of each error and the amount of the effect (i.e. the difference between the entry that was or was not made and the entry that should have been made). Use O if the effect overstates the item, U if the effect understates the item, and NE if there is no effect.

2. For each error, prepare the adjusting journal entry: 

a. That was made (if any).

b. That should have been made at year-end.  

Transcribed Image Text:

Transaction Assets a b C d e (D Balance sheet Liabilities Shareholders' equity Revenues Income statement Expenses Net profit