Assignment Task: Correcting Current Period Deferral Errors
Q1. During 20X0, your company purchases $2,000 of supplies and books the amount as an asset. As you prepare the trial balance on December 31, you see that there is no 20X0 supplies expense. A quick physical count reveals $700 of supplies on hand.
a. What is the correcting journal entry?
b. If no correcting journal entry is recorded, how are the 20X0 income statement and balance sheet, respectively, affected?
Q2. On March 1, 20X0, your company prepays $1,800 to rent equipment for 12 months and you book the amount as an asset. A review of year-end adjusting entries shows a debit to Rent Expense and credit to Prepaid Rent for $1,800.
a. What is the correcting journal entry?
b. If no correcting journal entry is recorded, how are the 20X0 income statement and balance sheet, respectively, affected?