The Bookkeeper for Phillips, Inc

question 33

Multiple Choice

The bookkeeper for Phillips, Inc. mistakenly recorded a $300,000 one-year trade note receivable as a long-term note receivable in 2017. Interest revenue was correctly recorded. The error was discovered in 2019 by the company's auditors. What is the proper way to correct the error?

• A) Ignore the error because it is not material in amount.
• B) Correct the classification in 2019 retrospectively for comparative balance sheets.
• C) Use a footnote disclosure only because it does not change working capital.
• D) Correct the classification and adjust retained earnings for 2017 and 2018.

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Definitions:

Property Taxes

Taxes levied by local governments based on the assessed value of real estate or other property owned.