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

Since the original entry was made with a debit to Buildings rather than Equipment, the correcting entry should be made with a debit to Equipment and a credit to Buildings for the same amount of $50,000. This will correct the error without overcorrecting or duplicating the entry. Choices A and C would result in duplicating the purchase and overinflating the assets. Choice D would result in overstating the cost of the equipment and understating the value of the building. Choice E would also overstate the cost of the equipment and is not necessary to correct the error.

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