A Company Forgot to Record Four Adjustments During 2012

question 33

Multiple Choice

A company forgot to record four adjustments during 2012. Which one of the following omissions of adjustments will understate income?

• A) Unearned revenue is not reduced for the portion that has been earned
• B) Interest on money borrowed has not yet been recorded.
• C) Prepaid insurance is not reduced for the portion of the policy that has expired during the period.
• D) Income taxes owed but not yet paid are ignored.

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Definitions:

Easement

A nonpossessory right, established by express or implied agreement, to make limited use of another’s property without removing anything from the property.

Product of the Land

Refers to natural resources or crops that are produced, grown, or extracted directly from the land.

Joint Tenant

An individual co-owning property with one or more persons, where each owns an equal share, and upon death, the interest passes to the surviving co-owners.

Chosen Heirs

Individuals or entities designated to receive inheritance under a will or through state intestacy laws in the absence of a will.