Failure to Make a Necessary Adjusting Entry for Accrued Interest

question 33

Multiple Choice

Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?

• A)Liabilities and stockholders' equity would both be understated.
• B)Net income would be overstated and assets would be understated.
• C)Net income would be understated and liabilities would be understated.
• D)Net income and stockholders' equity would be overstated and liabilities would be understateD.The adjusting entry increases interest payable and interest expense, which increases liabilities and decreases both net income and stockholders' equity.Failure to make the entry causes both net income and stockholders' equity to be overstated and liabilities to be understated.

---

Definitions:

Radio Frequencies

Electromagnetic waves typically ranging from 3 kHz to 300 GHz, used in various technologies including radio, television, and mobile phones.

Reticular Activating System

A network of neurons located in the brainstem that plays a crucial role in controlling arousal and the transition between sleep and wakefulness.

Neurons

Specialized cells in the nervous system that transmit information to other nerve cells, muscle, or gland cells.

Brain Stem

The part of the brain that connects the spinal cord with the forebrain and cerebrum, controlling many basic life functions such as breathing and heart rate.