ACCA Applied Knowledge · Financial Accounting · Suspense accounts
Kestrel Co's draft profit for the year was $62,000. The trial balance difference of $2,400 was posted to suspense. The following were then found: (1) the sales day book total of $18,600 was posted to the sales account as $16,200 and correctly to receivables; (2) a $5,000 payment for a machine was debited to repairs expense, with the credit correctly entered in bank. What are the corrected profit and the suspense balance before correction?
Corrected profit is $69,400, found by adding $2,400 for understated sales and $5,000 for the machine wrongly expensed to the draft profit of $62,000.
- AProfit $69,600; suspense was a creditCorrect
- BProfit $64,400; suspense was a debit
- CProfit $69,600; suspense was a debit
- DProfit $59,600; suspense was a credit
Explanation
Sales were understated by $2,400 (18,600 - 16,200), so profit rises by $2,400. The machine cost was wrongly expensed as $5,000 repairs, so profit rises by $5,000. Corrected profit is 62,000 + 2,400 + 5,000 = $69,400. None of the stated options equals this, so the item is flawed.
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More Suspense accounts questions
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