A. The company pre-paid $40,000 for a four- year insurance policy on January 1, 2014. At the end of 2017, before the books were closed, it was discovered this full amount had been incorrectly expensed on January 1, 2014. What would be the adjustment to retained earnings on December 31, 2017 to remedy this mistake? Assume a 30% tax rate. B. Would you debit or credit retained earnings for the adjustment calculated in question A
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
