A brewing company operating in an Ontario city experiencing water shortages received its water bill for December 2013, on December 31, 2013.The bill ($8,000)represents the cost of water used in December to make its product.The company will not publish the 2013 financial statements until February 2014.Therefore, the adjusting entry as of December 31, 2013 includes which of the following?
A)cr.utilities expense $8,000
B)cr.cash $8,000
C)cr.utilities payable $8,000
D)no adjusting entry needed because the bill will not be paid until January 2014

Question

Quizplus · Accepted Answer

The correct answer is C) cr. utilities payable $8,000 because the company has incurred the expense in December 2013, but will not pay the bill until a later date, thus creating a liability (utilities payable) that needs to be recorded in the December 2013 financial statements.

A Brewing Company Operating in an Ontario City Experiencing Water