Backline Advertising creates, plans, and handles advertising campaigns in a three-state area. Recently, Backline 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 $6,300?

3. What is the correct amount of total assets if the total assets on the books before correcting the preceding transactions was $20,000?

4. What is the correct net income for May if the reported income before correcting the preceding transactions was $9,000?

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A1 A. May 1 Accounts receivable 2 3 1,700 Service revenue Collected an account receivable. 1,700 2 Rent expense Cash Paid monthly rent, $400. 4,000 4,000 8 5 Cash 3,400 9. 10 11 12 Accounts receivable Collected cash for sservices provided. 3,400 10 Supplies 4,300 13 14 15 16 Accounts payable Purchased office equipment on account. 4,300 16 Dividends Cash Paid salaries. 5,500 17 5,500 18 19 20 21 25 Accounts receivable Cash Paid for supplies purchased earlier on account. 3,900 3,900 22 23 24 67 Date Effect on Cash May 1 Understated $1,700 Overstated $1,700 Effect on Total Assets Effect on Net Income Overstated $1,700