Mounder Corp. charges interest on its past due accounts receivable. A late fee of 18% per annum is added to each past due account. Mounder is preparing financial statements for the month of July and has determined there are $18,000 in past due accounts. Mounder should make an adjusting entry as follows

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The adjusting entry should reflect the amount of the late fee revenue earned by the company on the past due accounts. Since the late fee is calculated as 18% per annum, the monthly rate would be 1.5% (18%/12 months). Therefore, the amount of late fee revenue earned on the $18,000 past due accounts would be $270 ($18,000 x 1.5%). Since the company is adding this late fee revenue to its accounts receivable balance, it should debit accounts receivable for $270 and credit late fee revenue for $270. Choice B reflects this entry. Choices A, C, and D do not reflect the appropriate accounts or amounts for the adjusting entry.