Fu Company is owned and operated by Jeremy Fu. The following errors were found in the company's journal:
1. The purchase of $700 of supplies on account was recorded as a debit to Supplies Expense and a credit to accounts payable, both for $700. (The company records prepayments as assets.)
2. A $600 payment of an account payable was recorded as a debit to Cash and a credit to Accounts Payable, both for $600.
3. A cash advance of $575 from a customer was recorded as a debit to Service Revenue and a credit to Unearned Revenue, both for $350.
4. The depreciation adjusting entry was incorrectly recorded as $1,280. The amount should have been $1,820.
5. A customer was billed $650 for services provided on account. Unearned Revenue was debited and Service Revenue was credited, both for $650.
6. The accrual of $750 of interest expense was recorded as a debit to Interest Receivable and a credit to Interest Payable, both for $750.
7. A $500 collection of cash from a customer on account was recorded as a debit to Accounts Receivable and a credit to cash, both for $500.
8. A $950 payment for rent for Jeremy Fu's (the company's owner) apartment was debited to Rent Expense and credited to Cash, both for $950.
Instructions
(a) For each item, indicate the effect and amount of the error-understatement (U), overstatement (O), or no effect (NE)-on the income statement and balance sheet components. Use the following format, where the first one has been done for you as an example.

(b) Correct each error by reversing the incorrect entry and then recording the correct entry.
Taking It Further
Why it is incorrect to record the payment of the company owner's apartment rent as an expense, as described in error 8?

Transcribed Image Text:

Income Statement Balance Sheet Item Revenue Expenses Proft Assets Libes Owners Equity NE O $700 U $700 U $700 NE U $700