Which of the Following Would Overstate a Company's Net Income

question 149

Multiple Choice

Which of the following would overstate a company's net income?

• A)Counting shipments of customers' orders as revenue before payment has been received.
• B)Shipping goods to customers without receiving orders from those customers,and recording the transactions as revenue.
• C)Accruing liabilities for marketing expenses before they are incurred.
• D)Making an accrual adjusting entry for interest earned on a bond investment.

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Definitions:

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Variable Cost

Costs that vary directly with the level of production output or volume, such as raw materials and direct labor.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours worked, multiplied by the standard labor rate.

Standard Hours

A measure used in accounting to indicate the expected amount of time required to complete a task or project.