Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 4-9

TIP: This one is tricky because both the amount and an account were in error in the original entry.

Approach: Compare the correct entry with the incorrect entry to determine the accounts which need to be increased or decreased in the correcting entry to arrive at their correct balances.

Alternate Approach: If you are not usually successful in identifying the appropriate correcting entry by using the approach above, a simpler approach may be to reverse the incorrect entry and prepare the correct entry. These two entries together constitute the correction. For example, refer to error number 1. The correction could be made by the following:

Notice that these two entries are the equivalent to the single correcting entry given earlier in the solution as:

You can readily tell this because in the two entry (second) approach, the debit to Cash for $120 offsets the ...