Problem 3-31A Effect of errors on the trial balance

The following trial balance was prepared from the ledger accounts of Smith Inc.:

Smith INC Trail Balance May 31, 2013

Account Titles	Debit	Credit
Cash	$7,200	0
Accounts Receivable	1,770	0
Supplies	420	0
Prepaid Insurance	2,400	0
Land	5,000	0
Accounts Payble	0	$1,500
Common Stock	0	1,800
Retained Earnings	0	7,390
Dividends	400	0
Service Revenue	0	19,600
Rent Expense	3,600	0
Salaries Expense	9,000	0
Operating Expenses	2,500	0
Totals	$32,290	$30,290

The accountant for Smith, Inc., made the following errors during May 2013:

1. The cash purchase of land for $3,000 was recorded as a $5,000 debit to Land and a $3,000

credit to Cash.

2. A $1,600 purchase of supplies on account was properly recorded as a debit to the Supplies

account but was incorrectly recorded as a credit to the Cash account.

3. The company provided services valued at $7,800 to a customer on account. The accountant

recorded the transaction in the proper accounts but in the incorrect amount of $8,700.

4. A $1,200 cash receipt from a customer on an account receivable was not recorded.

5. An $800 cash payment of an account payable was not recorded.

6. The May utility bill, which amounted to $1,050 on account, was not recorded.

Required

a. Identify the errors that would cause a difference in the total amounts of debits and credits

that would appear in a trial balance. Indicate whether the Debit or Credit column would be

larger as a result of the error.

b. Indicate whether each of the preceding errors would overstate, understate, or have no effect on

the amount of total assets, liabilities, and equity. Your answer should take the following form:

Event No.	Assets	=	Liabilities	+	Stockholders Equity
1	overstate		No effect		No effect

c. Prepare a c orrected t rial b alance.