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Simpson Company purchased $900 of equipment by paying cash and recorded the expenditure as a purchase of land. The error was discovered a week later. Prepare the two journal entries required to correct the error. (First, reverse the error and then record the appropriate entry.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answer:

Given that,

Equipment cost = $900 paid cash

Recorded as a purchase of land, so the correct entry is required.

The journal entries are as follows:

(i) Cash A/c        Dr. $900

To Land A/c                          $900

(To record reverse error)

(ii) Equipment A/c      Dr. $900

To cash A/c                                $900

(To record purchase equipment)

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