What Is the Effect on the Financial Statements When a Company

question 41

Multiple Choice

What is the effect on the financial statements when a company fails to accrue wages expense at year-end?

• A)Net income is overstated and liabilities are understated.
• B)Expenses are understated and stockholders' equity is understated.
• C)Expenses and liabilities are both overstated.
• D)Net income is overstated and liabilities are properly reported.

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Definitions:

Inventoriable

Costs or goods that are considered inventory and can be accounted for as assets until they are sold or used.

Period Costs

Expenses that are not directly tied to the production of goods, such as sales, administration, and other overhead costs.

Factory Insurance

A type of insurance policy that provides coverage against losses or damages to a manufacturing facility and its operations.

Depreciation Expense

The allocation of the cost of tangible assets over their useful lives, reflecting the decrease in value over time.