Richards Advertising creates, plans, and handles advertising needs in the Tri-State area. Recently, Richards had to replace an inexperienced office worker in charge of bookkeeping because of some serious mistakes that had been uncovered in the accounting records. You have been hired to review these transactions to determine any corrections that might be necessary. In all cases, the bookkeeper made an accurate description of the transaction.

Requirements
1. For each of the preceding entries, indicate the effect of the error on cash, total assets, and net income. The answer for the first transaction has been provided as an example.

2. What is the correct balance of cash if the balance of cash on the books before correcting the preceding transactions was $5,500?
3. What is the correct amount of total assets if the total assets on the books before correcting the preceding transactions was $25,000?
4. What is the correct net income for May if the reported income before correcting the preceding transactions was$10,000?

A1 1 May 1 Accounts receivable 300 Service revenue 300 Collected on account receivable 2 Rent expense 5,000 Cash 5,000 Paid monthly rent, $500. 5 Cash 1,000 Accounts receivable 1,000 10 1. Collected cosh for services provided. 10 Supplies 2,500 Accounts payable 2,500 Purchased office equipment on occount. 15 17 19 21 16 Dividends Cash 2,000 2,000 Paid salaries. 25 Accounts receivable 1,500 Cash 1,500 Paid for supplies purchased earlier on account. Date Effect on Cash Effect on Total Assets Overstated $300 Effect on Net Income Overstated $300 May1 Understated $300