Lisa Ortega Case Summary
ACC557
Lisa Ortega is the president of Ortega Riding Academy, Inc. The company’s primary source of revenue comes from riding fees and lesson fees, which are paid on a cash basis. The company also board gorses for owners in which they are billed in turn for their monthly boarding fees. The company has hired a new inexperienced bookkeeper. There were several mistakes made during the general journal entries made by the bookkeeper. The first error was on May 7, it should have read debit unearned revenue and credit riding revenue for $300. The next error was on May 14 there was a clerical error of $80 for a debit to riding equipment in which it should have read debit of $800. On May 20 there another clerical error of a debit to cash $148 instead of $184. The last error was for hay and feed expense it should have been a debit to hay and feed supply for $1,700 and a credit to accounts payable for $1,700 not to the cash account for $1,700. …show more content…
The errors that were made would have kept the trial balance from balancing.
The fact that the accounts were incorrect in which were to be debited and credited would have made the trial balance not balance. Also, the errors in the dollar values within the accounts to be credited and debited would have played a major part in the trial balance being unbalanced. The net income for the Ortega Riding Academy, Inc. would have been $9.00 based on the information that was provided within the journal entries posted. The total ending balance for the cash account would have been $17,234.00 after adding the earned revenues and subtracting the
expenses.
Ortega Riding Academy, Inc.
General Journal Entry
a.) Highlighted are correct journal entries
May 1 Cash 18,000 Common Stock 18,000
5 Cash 250 Riding Revenue 250
7 Unearned Revenue 300 Boarding Revenue 300
14 Riding Equipment 800 Cash 800
15 Salaries Expense 400 Cash 400
20 Cash 184 Riding Revenue 184
30 Veterinary Expense 75 Accounts Payable 75
31 Hay and Feed Supplies 1,700 Accounts Payable 1,700
b.) May 7, 14, 20 and 31 journal entries would prevent the trial balance from balancing.
May 7 should have been unearned revenue and boarding revenue for $300. May 14 should have read Riding Equipment and cash for $800. The entry had a typo of $80 for Riding Equipment and Cash for $800. May 20 had a typo error of $148 for cash and $184 for riding revenue. May 31 journal entry should have been for Hay and Feed Supplies for $1,700 and accounts payable for $1,700.
c.) According to the information that was provided there was a total service revenue of $484 and expenses totaled $$475 therefore, the next income for the company would have been $9. (unless there was information that is supposed to be unknown, giving the information that was included in the problem this is the answer). Therefore, the posting of the net income of $4,500 is indeed incorrect.
d.) The correct cash balance should have been $17,234. The beginning cash balance was $18,000 adding the revenue of $250 and $184. This would give a total of $18,434 and minus expenses of $800 and $400 would leave a total $17,234 for the ending cash balance.
Lisa Ortega is the president of Ortega Riding Academy, Inc. The company’s primary source of revenue comes from riding fees and lesson fees, which are paid on a cash basis. The company also board gorses for owners in which they are billed in turn for their monthly boarding fees. The company has hired a new inexperienced bookkeeper. There were several mistakes made during the general journal entries made by the bookkeeper. The first error was on May 7, it should have read debit unearned revenue and credit riding revenue for $300. The next error was on May 14 there was a clerical error of $80 for a debit to riding equipment in which it should have read debit of $800. On May 20 there another clerical error of a debit to cash $148 instead of $184. The last error was for hay and feed expense it should have been a debit to hay and feed supply for $1,700 and a credit to accounts payable for $1,700 not to the cash account for $1,700. …show more content…
The errors that were made would have kept the trial balance from balancing.
The fact that the accounts were incorrect in which were to be debited and credited would have made the trial balance not balance. Also, the errors in the dollar values within the accounts to be credited and debited would have played a major part in the trial balance being unbalanced. The net income for the Ortega Riding Academy, Inc. would have been $9.00 based on the information that was provided within the journal entries posted. The total ending balance for the cash account would have been $17,234.00 after adding the earned revenues and subtracting the
expenses.
Ortega Riding Academy, Inc.
General Journal Entry
a.) Highlighted are correct journal entries
May 1 Cash 18,000 Common Stock 18,000
5 Cash 250 Riding Revenue 250
7 Unearned Revenue 300 Boarding Revenue 300
14 Riding Equipment 800 Cash 800
15 Salaries Expense 400 Cash 400
20 Cash 184 Riding Revenue 184
30 Veterinary Expense 75 Accounts Payable 75
31 Hay and Feed Supplies 1,700 Accounts Payable 1,700
b.) May 7, 14, 20 and 31 journal entries would prevent the trial balance from balancing.
May 7 should have been unearned revenue and boarding revenue for $300. May 14 should have read Riding Equipment and cash for $800. The entry had a typo of $80 for Riding Equipment and Cash for $800. May 20 had a typo error of $148 for cash and $184 for riding revenue. May 31 journal entry should have been for Hay and Feed Supplies for $1,700 and accounts payable for $1,700.
c.) According to the information that was provided there was a total service revenue of $484 and expenses totaled $$475 therefore, the next income for the company would have been $9. (unless there was information that is supposed to be unknown, giving the information that was included in the problem this is the answer). Therefore, the posting of the net income of $4,500 is indeed incorrect.
d.) The correct cash balance should have been $17,234. The beginning cash balance was $18,000 adding the revenue of $250 and $184. This would give a total of $18,434 and minus expenses of $800 and $400 would leave a total $17,234 for the ending cash balance.