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.

---

Definitions:

Exorcism

A religious or spiritual ritual intended to cast out a demon or spirit from a person or area.

Psychotic

Relating to psychosis, characterized by an impaired relationship with reality, which may include delusions and hallucinations.

Allen Memorial Hospital

A psychiatric hospital associated with McGill University in Montreal, Canada, known for its historical involvement in controversial brainwashing experiments during the 1950s and 1960s.

Brain Washing Experiments

Practices or studies aimed at changing beliefs or behaviors through coercive and often unethical methods.