In 2016, Cunningham Company determined that it did not accrue $15,000 of interes

Question

In 2016, Cunningham Company determined that it did not accrue $15,000 of interest expense in 2015, which caused a material overstatement of income. Assuming a 35% tax rate, which of the following presents the journal entries that would correct the error?

Retained Earnings (debit) a) 15,000 b) 15000 c) 9750 d) 5250

   Interest Payable (credit) a) 15000 b) 15000 c) 9750 d) 5250

Income Tax Receivable (or Payable) (debit)    a) 15000 b) 5250 c) 5250 d) 9750

   Retained Earnings (credit)    a)15000 b) 5250 c) 5250 d) 9750

Which letter selection is correct?   

Explanation / Answer

Retained Earnings 15,000 Interest Payable 15,000 Income Tax Receivable (or Payable) 5,250 Retained Earnings 5,250

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