Question

Melon Corp. noticed that a check written by the company for $2,100 for advertising expense was incorrectly recorded in the accounting records as $1,200. What needs to be recorded to correct this error?

Answer 1

To correct the recording error, Melon Corp. must make a journal entry to debit advertising expense by $900 and credit cash or accounts payable by $900, reflecting the actual amount paid for the advertising expense.

Step-by-step explanation:

To correct the error that Melon Corp. made when recording the check for advertising expense, a journal entry is required. The company incorrectly recorded the check as $1,200 instead of $2,100. Thus, they underreported the expense by $900.

To rectify this, Melon Corp. should debit advertising expense by an additional $900 and credit cash or accounts payable (depending on whether the cheque has cleared or not) by the same amount. This adjusting entry ensures that advertising expenses are accurately reported in the financial statements and that the cash or payables are correctly stated.

• Debit: Advertising Expense $900
• Credit: Cash/Accounts Payable $900

This correction will ensure that the company's records accurately reflect the actual payment made for advertising expenses.