What Is the Effect on the Financial Statements When a Company

question 4

Multiple Choice

What is the effect on the financial statements when a company fails to adjust the unearned revenue account for revenues earned at year-end?

• A)Net income is understated and assets are understated.
• B)Revenues are understated and liabilities are understated.
• C)Net income is understated and liabilities are overstated.
• D)Revenues are understated and stockholders' equity is overstateD.Failure to recognize revenues that were previously reported as unearned results in lower revenues = lower net income figure; overstated unearned revenue = overstated liabilities.

---

Definitions:

Brain's Reward Pathway

A neural pathway in the brain that releases dopamine in response to experiences perceived as rewarding, motivating repetition of those behaviors.

Tolerance

The need to take increasing amounts of a drug to get the same effect.

Marijuana

A psychoactive drug from the Cannabis plant used for medical or recreational purposes.

Dopamine Dependence

A condition where an individual's normal neurobiological reward system becomes excessively reliant on activities or substances that significantly increase dopamine levels.