Which of the Following Misstatements Would Cause the Asset Turnover

question 50

Multiple Choice

Which of the following misstatements would cause the asset turnover ratio to be overstated?

• A)Misclassifying an expense as an asset.
• B)Failing to adjust the unearned revenue account for amounts earned.
• C)Failing to accrue interest on a loan payable to the bank.
• D)Failing to accrue rent earned for the current period.

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overhead, payroll, taxes, and interest payments.

Operating Expenses

Costs associated with the day-to-day operations of a business, including rent, utilities, salaries, and office supplies.

Sales Revenue

The income received from selling goods or services over a given period of time before any deductions are made for costs or expenses.

Other Expenses

Expenses that are not directly tied to the production of goods or services but are necessary for the overall operation of the business.