Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment purchase as a debit to Buildings.This error was not discovered before the journal entry was posted.What is the correcting entry?
A)Debit Buildings and credit Equipment for $50,000 each.
B)Debit Equipment and credit Buildings for $50,000 each.
C)Debit Buildings and credit Equipment for $100,000 each.
D)Debit Equipment and credit Buildings for $100,000 each.
E)Debit Equipment for $100,000 and credit Buildings for $50,000.

Question

Quizplus · Accepted Answer

The incorrect entry debited Buildings instead of Equipment, which means that Buildings is overstated by $50,000 and Equipment is understated by $50,000. Therefore, the correcting entry should debit Equipment and credit Buildings for $50,000 each to correct the error. Option A and C are incorrect because they result in either overstating or understating both accounts by $50,000 each. Option D is also incorrect because it overcorrects the error by overstating Equipment by $100,000 and understating Buildings by $100,000. Option E is incorrect because it overcorrects the error by overstating Equipment by $50,000 more than the original amount and understating Buildings by only $50,000.

Accountants at Amalgamated Corporation Incorrectly Journalized a $50,000 Equipment Purchase