Mason Company has an inexperienced accountant. During the first 2 weeks on the job, the accountant made the following errors in journalizing transactions. All entries were posted as made.

1. A payment on account of $630 to a creditor was debited to Accounts Payable $360 and credited to Cash $360.

2. The purchase of supplies on account for $560 was debited to Equipment $56 and credited to Accounts Payable $56.

3. A $400 cash dividend was debited to Salaries Expense $400 and credited to Cash $400.

Instructions

Prepare the correcting entries.

E4-14 The adjusted trial balance for Karr Bowling Alley at December 31, 2011, contains the following accounts.E4-10 Josh Borke has prepared the following list of statements about the accounting cycle.

1. “Journalize the transactions” is the first step in the accounting cycle.

2. Reversing entries are a required step in the accounting cycle.

3. Correcting entries do not have to be part of the accounting cycle.

4. If a worksheet is prepared, some steps of the accounting cycle are incorporated into the worksheet.

5. The accounting cycle begins with the analysis of business transactions and ends with the preparation of a post-closing trial balance.

6. All steps of the accounting cycle occur daily during the accounting period.

7. The step of “post to the ledger accounts” occurs before the step of “journalize the transactions.”

8. Closing entries must be prepared before financial statements can be prepared.

Instructions

Identify each statement as true or false. If false, indicate how to correct the statement.

Debits		Credits
Building	$128,800	Common Stock	$100,000
Accounts Receivable	14,520	Retained Earnings	15,000
Prepaid Insurance	4,680	Accumulated Depreciation—Building	42,600
Cash	18,040	Accounts Payable	12,300
Equipment	62,400	Note Payable	97,780
Land	64,000	Accumulated Depreciation—Equipment	18,720
Insurance Expense	780	Interest Payable	2,600
Depreciation Expense	7,360	Bowling Revenues	14,180
Interest Expense	2,600		$303,180
	$303,180

Instructions

(a) Prepare a classified balance sheet; assume that $13,900 of the note payable will be paid in 2012.

(b) Comment on the liquidity of the company.