E2-72 (L earn i ng Obj ec tiv es 4 , 6: Analy z e t he imp ac t o f bu s i ness t ransac ti ons on a

E2-72 (Learning Objectives 4, 6: Analyze the impact of business transactions on accounts; construct and use a trial balance) The trial balance of Rectangle 120, Inc., at August 31, 2012, does not balance.

 

 

 

 

 

Cash………………………………

$  3,900

Common stock………………..

$20,100

Accounts receivable………….

7,400

Retained earnings…………….

7,500

Land………………………………

34,400

Service revenue………………..

9,500

Accounts  payable …………….

6,000

Salary expense…………………

3,300

Note payable…………………..

5,500

Advertising  expense………….

1,100

 

 

 

 

 

▶ Requirements

1. How much out of balance is the trial balance? Determine the out-of-balance amount. The error lies in the Accounts Receivable account. Add the out-of-balance amount to, or subtract it from, Accounts Receivable to determine the correct balance of Accounts Receivable.

2.    After correcting Accounts receivable, advise the top management of Rectangle 120, Inc., on the company’s

a.           total assets.

b.    total liabilities.

c.     net income or net loss for August.