Exercise 22-16

You have been engaged to review the financial statements of TealCorporation. In the course of your examination, you conclude thatthe bookkeeper hired during the current year is not doing a goodjob. You notice a number of irregularities as follows.

1.		Year-end wages payable of $3,130 were not recorded because thebookkeeper thought that “they were immaterial.”
2.		Accrued vacation pay for the year of $34,100 was not recordedbecause the bookkeeper “never heard that you had to do it.”
3.		Insurance for a 12-month period purchased on November 1 of thisyear was charged to insurance expense in the amount of $2,724because “the amount of the check is about the same every year.”
4.		Reported sales revenue for the year is $2,141,200. This includesall sales taxes collected for the year. The sales tax rate is 6%.Because the sales tax is forwarded to the state’s Department ofRevenue, the Sales Tax Expense account is debited. The bookkeeperthought that “the sales tax is a selling expense.” At the end ofthe current year, the balance in the Sales Tax Expense account is$104,600.

Prepare the necessary correcting entries, assuming that Teal uses acalendar-year basis. The books for the current year have not beenclosed. (Credit account titles are automaticallyindented when amount is entered. Do not indent manually. If noentry is required, select "No Entry" for the account titles andenter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.
4.
	(To record the sales taxes due.)
	(To correct prior entry.)