Which of the Following Errors Would Most Likely Lead to an Overstatement

question 75

Multiple Choice

Which of the following errors would most likely lead to an overstatement of income?

• A) Failure to adjust prepaid expenses account for the portion of insurance expired this year.
• B) Failure to adjust deferred rent revenue account for the portion of rent earned this year.
• C) Recording revenue in the next period when the cash is collected although it is earned in the current year.
• D) Recording an expense incurred in this year when the cash is paid next year.

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Definitions:

Sales Promotion

A marketing strategy involving the use of short-term incentives to encourage the purchase or sale of a product or service.

Marginal Revenue

The increase in revenue that results from selling one more unit of a product.

Imperfect Competition

A market structure characterized by the presence of several competing firms but which lack the conditions of perfect competition, often leading to market power.

Implicit Cost

The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment; includes a normal profit.