On December 31,Carmack Company received a $215 utility bill for December that it will not pay until January 15.The adjusting entry needed on December 31 to accrue this expense is:
A)Debit Utilities Expense $215; credit Accounts Payable $215.
B)Debit Accounts Payable $215; credit Utilities Expense $215.
C)Debit Prepaid Utilities $215; credit Cash $215.
D)Debit Utilities Expense $215; credit Prepaid Utilities $215.
E)Debit Prepaid Utilities $215; credit Accounts Payable $215.

Question

Quizplus · Accepted Answer

The adjusting entry needed on December 31 to accrue the expense is to debit Utilities Expense $215 and credit Accounts Payable $215. This is because the expense has been incurred in December but the payment is not due until January. Therefore, the company needs to record the expense in December by debiting Utilities Expense and accruing a liability to pay the bill in the future by crediting Accounts Payable.

On December 31,Carmack Company Received a $215 Utility Bill for December