JAT Corploaned $375,000 for Three Years to a Major Supplier on on July

question 334

Multiple Choice

JAT Corp.loaned $375,000 for three years to a major supplier on July 1,2015.The note stipulated 10% interest to be paid annually each June 30.Since this was an unusual transaction,no one billed the supplier for the interest in 2016 or recorded the accrued interest at the year end (December) .On March 1,2017,after the 2016 books were closed,the CFO found the error.Which one of the following is the correct journal entry to correct the errors thru March 1,2017? (Ignore income taxes.)

• A)Since it has not been billed,no entry should be made until June 30,2017.
• B) Retained Earnings-Prior Period Adjustment 56,250
• C) Interest Revenue 6,250 Retained Earnings-Prior Period Adjustment 56,250
• D) Interest Revenue 56,250

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Definitions:

Units Started And Completed

The number of units that have been both initiated and finished within a specific accounting period, relevant in manufacturing and production processes.

Direct Materials

Raw materials that are directly incorporated into a finished product and are easily traceable to the product.

Direct Materials

Core ingredients that are directly associated with the assembly of specific items or delivery of services.

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.