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Dooley Company sent a deposit of $7,000 to the bank. The bank credited Dooley Company's checking account for a deposit of $700. In reconciling the bank statement, the bookkeeper saw the deposit of $700 instead of the bank recording it at $7,000. Which journal entry should Dooley Company prepare?

A. Debit Cash for $6,300 and credit Deposits for $6,300.
B. Debit Cash for $6,300 and credit Accounts Receivable for $6,300.
C. Debit Cash for $6,300 and credit Revenue for $6,300.
D. No journal entry is required.

Answer :

The correct journal entry for Dooley Company to prepare in this scenario is as follows: Debit Cash for $6,300 and credit Accounts Receivable for $6,300.

This journal entry reflects the correction for the bank's incorrect recording of the deposit. By debiting Cash for $6,300, it reduces the Cash account to the correct amount of $6,300. Since the bank credited Dooley Company's checking account for $700 instead of the actual deposit of $7,000, it implies that the remaining $6,300 is still owed to Dooley Company. Therefore, the credit to Accounts Receivable for $6,300 reflects the amount owed to Dooley Company by the bank.

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