Error correction (Learning Objective 4) 15–20 min.

The following errors occurred in the accounting records of Allied Security, Inc.:

a. The company accountant recorded the receipt of cash for service revenue by debiting Cash for $240 instead of the correct amount of $420. Service Revenue was also credited for $240, the incorrect amount.

b. A $375 purchase of supplies on account was recorded by debiting Accounts Payable and crediting Supplies.

c. The company accountant recorded a $1,375 payment of rent by debiting rent expense for $13,750 and crediting Cash for $13,750.

d. In recording a $1,100 payment on account, Accounts Receivable was debited and Cash was credited.

Requirements 1. Prepare the necessary journal entries to correct each of these errors.

2. For each of the errors, determine if the error would cause net income to be overstated, understated, or unchanged.

AppendixLO1