The owner of D'Addario Company has been doing all of the company's bookkeeping. When the accountant arrived to do the
The owner of D'Addario Company has been doing all of the company's bookkeeping. When the accountant arrived to do the year-end adjusting entries, she found the following errors:
1. A payment of salaries of $625 was debited to Supplies and credited to Cash, both for $625.
2. The investment of cash of $2,000 by the owner, Toni D'Addario, was debited to Short-Term Investments and credited to Cash, both for $2,000.
3. The collection of an account receivable of $780 was debited to Cash and credited to Accounts Receivable, both for $870.
4. The company had purchased $440 of supplies on account. This entry was correctly recorded. When the account was paid, Supplies was debited $440 and Cash was credited $440.
5. Equipment costing $3,500 was purchased by signing a six-month note payable. Equipment Expense was debited and Accounts Payable was credited, both for $3,500.
(a) Correct the errors by reversing the incorrect entry and preparing the correct entry.
(b) Correct the errors without reversing the incorrect entry?