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What is your answer about the following question?

On December31,2012, ACM Co. accrued as interest revenue $8,000 that applied to2013. On that date, the company recorded a debit to interest receivable and a credit to interest revenue. which of the following entries is needed on December31,2013, to correct for this error, assuming that ACM has not closed the books for2013?: 

 

 

A) Debit retained earnings by8,000 & credit  interest revenue by8,000.

 

B) Debit retained earnings by8,000 & credit  interest receivable by8,000.

 

C) Debit interest revenue by8,000 & credit interest receivable by8,000.

 

D) No journal entry is needed because the error is counterbalanced.

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Question added by Ahmed Abdi Mahad , Director of Internal Auditing Directorate , Jigjiga University
Date Posted: 2015/04/26
Abdel Rahman Elsheikh Eltaher Hussein
by Abdel Rahman Elsheikh Eltaher Hussein , Chief Accountant , Sudasat JV

B) Debit retained earnings by8,000 & credit  interest receivable by8,000

fai hacker
by fai hacker , owner , medical store (own)

option d is the right answer ...... thank u

Ahmed kandil
by Ahmed kandil , Cost Controller , Battour Holding Cpompany

C is the correct answer thank you

No journal entry is needed because the error is counterbalanced 

Sayed Aziz  Ahmed
by Sayed Aziz Ahmed , Accounts Manager , Ergoflex (I) Pvt. Ltd.

A) Debit retained earnings by $8,000 & credit  interest revenue by $8,000.

Explanation : Since the interest revenue relates to Financial year2013 and it was wrongly credited ti Interest Revenue in the year2012 that inflated the profit of2012 by $8,000.To rectify this error we need to decrease the opening balance of Retained earnings(Ending balance of  2012) and bring the interest revenue to current accounting year.

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