Question

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.

Answer 1

The correct adjusting entry for Carmack Company's utility bill is to debit Utilities Expense $215 and credit Accounts Payable $215. Therefore correct option is A

Step-by-step explanation:

The correct adjusting entry needed on December 31 to accrue the utility expense that Carmack Company will not pay until January 15 is: Debit Utilities Expense $215; credit Accounts Payable $215. This entry reflects the accrual accounting principle, which requires expenses to be recorded in the period they are incurred, regardless of when they are paid. The Utilities Expense account is debited because the company has used the utilities, thus incurring an expense. The Accounts Payable account is credited to represent the company's obligation to pay this bill in the future.