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Answer :
Final answer:
To correct a compliance mistake in a journal entry, reverse the initial entry and record the transaction correctly. The correct answer in this situation would be (e) debit Interest Expense $125 and credit Utilities Expense $125.
Explanation:
To determine the correct journal entry to correct the original one, we need to know what the original mistake was. However, typically, when you make an error in a journal entry, you will need to reverse the initial entry and then record the transaction correctly. If the original mistake was booking an expense under Utilities Expense instead of Interest Expense, then you'd need to: 1. Debit Interest Expense $125 to increase the interest expense, which was understated by the incorrect original entry. 2. Credit Utilities Expense $125 to decrease the utilities expense that was overstated by the incorrect original entry. So, the correct answer is (e) debit Interest Expense $125 and credit Utilities Expense $125.
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