Topeka Bike Company Received a $920 Check from a Customer

question 190

Multiple Choice

Topeka Bike Company received a $920 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $290 and a credit to Service Revenue $290. The correcting entry is

• A) debit Cash, $920; credit Accounts Receivable, $920.
• B) debit Cash, $630 and Accounts Receivable, $290; credit Service Revenue, $920.
• C) debit Cash, $630 and Service Revenue, $290; credit Accounts Receivable, $920.
• D) debit Accounts Receivable, $920; credit Cash, $630 and Service Revenue, $290.

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Definitions:

Depreciation Deduction

A tax deduction that allows a taxpayer to recover the cost of property or assets that have a useful life beyond the tax year, through annual allowances.

Income Tax Expense

The accounting term for the income taxes payable within a given period, reflecting the cost of the taxes a company must pay based on its earnings.

Present Value

Present value is a financial concept that calculates the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as an investment for retirement.