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 alt="Question 2
The Trial Balance of Asanko Enterprise as at 31st October 2021 failed to agree and a difference
(a shortfall) of GH¢1,350,000 on the debit side was placed in a Suspense Account, pending the
finding of the cause of the disagreement.
Further investigations carried out by the accounts officer revealed the following errors;
a. Bad debt written off, GH¢169,500 was not recorded in the books at all though
management had given approval for their write off.
b. Cash Purchases GH¢744,000 was recorded in the cashbook only.
c. Salary to Gidigidi GHe 1,356,000 was debited to Telephone expenses account.
d. Sales account was overstated on page 200 of the Sales Day Book by GH¢795,000
e. Purchases Account in the general ledger was undercast by GH¢96,000.
f. Total cash drawings of GH¢1,080,000 was correctly entered into the cashbook but was
duplicated in the Drawings account.
g. There was no entry the Machinery account for the purchase of a machine by cash for
GH¢1,350,000.
h. Credit sales to Manuela GH¢1,350,000 was debited to sales account and credited to her
account in the sales ledger.
i. Rent paid GH¢1,200,000 was posted into Utility expenses account.
j.
Motor van bought from PHC Motors on credit for GH¢450,000 was debited to Motor
running expenses account.
k. Payments to creditors by cheque GH¢1,560,000 was not recorded in the books at all
although the receipts were given to the Accounts Clerk.
1. GH¢555,000 cash received from Mr. Anokye, a debtor, recorded in the cashbook, was
not posted into his account.
You are required to:
a. Use Journal Entries to record the correction of the errors
b. Write up the Suspense account after the correction of the errors
c. Assuming that the Net Profit arrived at on the basis of the old Trial Balance figures was
GH 2,587,500, prepare a statement to show the corrected Net Profit for the year ended
31st October 2021.
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Step by stepSolved in 5 steps with 5 images
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1. For the sales account overcast, shouldn't the sales account debited to reduce the amount by the overcast figure?
2. If there wasn't any entry into the Machine account which the cash used to buy the machine was recorded, the accounts going to be machine and suspense?
3. Amount received from Mr Anokye was recorded in the
1. For the sales account overcast, shouldn't the sales account debited to reduce the amount by the overcast figure?
2. If there wasn't any entry into the Machine account which the cash used to buy the machine was recorded, the accounts going to be machine and suspense?
3. Amount received from Mr Anokye was recorded in the
- Problem 7-4 (Bad Debt Reporting) From inception of operations to 31 December 2019, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions were recorded based on analysis of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Fortner's usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $130,000 at 1 January 2019. During 2019, credit sales totalled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Fortner installed a computer system in November 2019, and an aging of accounts receivable was prepared for the first time as of 31 December 2019. A summary of the…arrow_forwardExercise 7-4 (Algo) Direct write-off method LO P1 Dexter Company uses the direct write-off method. March 11 Dexter determines that it cannot collect $10,000 of its accounts receivable from Leer Company. March 29 Leer Company unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt. Prepare journal entries to record the above transactions.arrow_forwardDon't give answer in image formatarrow_forward
- Please help mearrow_forward! Required information Problem 7-2A (Static) Estimating and reporting bad debts LO P2, P3 [The following information applies to the questions displayed below.] At December 31, Hawke Company reports the following results for its calendar year. Cash sales Credit sales $ 1,905,000 $ 5,682,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts Problem 7-2A (Static) Part 1 $ 1,270,100 debit $ 16,580 debit Required: 1. Prepare the adjusting entry to record bad debts under each separate assumption. a. Bad debts are estimated to be 1.5% of credit sales. b. Bad debts are estimated to be 1% of total sales. c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31).arrow_forward
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