For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. If the debit and credit totals would be equal, enter zero ("0") in the amount box. a. The payment of an insurance premium of $5,610 for a three-year policy was debited to Prepaid Insurance for $6,510 and credited to Cash for $5,610. Which of the following is true?
A) The credit column on the trial balance would be higher than the debit total. If the totals on the trial balance are not equal, by how much is one column higher than the other? $ 900
B) A payment of $2,950 on account was debited to Accounts Payable for $2,065 and credited to Cash for $2,065. Which of the following is true? The debit and credit totals of the trial balance would be equal. If the totals on the trial balance are not equal, by how much is one column higher than the other? $
c. A purchase of supplies on account for $4,560 was debited to Supplies for $4,560 and debited to Accounts Payable for $4,560.

Question

03-09-2019
Business

contestada

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. If the debit and credit totals would be equal, enter zero ("0") in the amount box. a. The payment of an insurance premium of $5,610 for a three-year policy was debited to Prepaid Insurance for $6,510 and credited to Cash for $5,610. Which of the following is true?
A) The credit column on the trial balance would be higher than the debit total. If the totals on the trial balance are not equal, by how much is one column higher than the other? $ 900
B) A payment of $2,950 on account was debited to Accounts Payable for $2,065 and credited to Cash for $2,065. Which of the following is true? The debit and credit totals of the trial balance would be equal. If the totals on the trial balance are not equal, by how much is one column higher than the other? $
c. A purchase of supplies on account for $4,560 was debited to Supplies for $4,560 and debited to Accounts Payable for $4,560.

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stokholm stokholm · Answer 1 · 2019-09-06T08:38:26+02:00

Answer:

a) It will cause unequal trial balance, Debit total will be higher by $900.

b) It will not create difference in debit and credit totals, as the balance of entry is equal, that is a compensating error.

c) There is no error in this. No difference in trial balance.

Explanation:

Trial balance does not show total of debits and credits journal entries, it shows balances of all the accounts.

a) Prepaid insurance is of $5,610 recorded as $6,510 the difference is of $900 recorded in prepaid insurance account. Cash A/c is credited properly with correct balance.

Thus, as cash account is an asset it will show debit balance at year end, and prepaid insurance is also an asset it will show extra debit balance. Thus, debit will be higher in trial balance by $900

b) Although the payment is recorded with wrong amount, but, in the journal entry since the amount is same for debit and credit account the trial balance will match.

c) The entire entry is recorded properly without any error.

Thus, trial balance will not have any difference.

Final Answer

a) It will cause unequal trial balance, Debit total will be higher by $900.

b) It will not create difference in debit and credit totals = 0, as the balance of entry is equal, that is a compensating error.

c) There is no error in this. No difference in trial balance.