The following events for Digital Waste Paper Ltd have yet to be recorded: (a) Cash...
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Accounting
The following events for Digital Waste Paper Ltd have yet to be recorded:
(a) Cash is returned to investors through a share buy-back. The company buys 100,000 shares from investors, and these shares are cancelled. While the market price is $5 per share, the company pays investors $6 per share.
(b) The accountant has discovered an error in the previous years income statement, as unearned revenue (or revenue received in advance) had not been adjusted on the balance date. $50,000 of unearned revenue had, in fact, been earned and should have been recorded as revenue.
(c) The accountant has also discovered another error in the previous years income statement as invoice for $20,000 of legal services was not recorded.
Required:
Prepare journal entries for the above events.
Digital Waste Paper Ltds General Journal:
Date
Account Names
Debit
Credit
(a)
(To record a share buy-back)
(b)
(To record a prior period error in unearned revenue)
(c)
(To record a prior period error in accounts payable)
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