A New Accountant Working for Unitas Company Records $800 Depreciation

question 58

Multiple Choice

A new accountant working for Unitas Company records $800 Depreciation Expense on store equipment as follows: The effect of this entry is to

• A) adjust the accounts to their proper amounts on December 31.
• B) understate total assets on the statement of financial position as of December 31.
• C) overstate the book value of the depreciable assets at December 31.
• D) understate the book value of the depreciable assets as of December 31.

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Definitions:

Deferred Taxes

Taxes that are due on income or transactions that have been recorded in the financial statements but have not yet been settled in cash.

Tax Contingency Reserve

A tax contingency reserve is an accounting provision made to cover potential tax liabilities that may arise due to uncertainties in the interpretation of tax laws or disputes with tax authorities.

Earnings Quality

An assessment of the true income generated by a company, gauging how accurately the reported income reflects the company's true earning power.

Deferred Tax Assets

Assets on a company's balance sheet that may be used to offset future tax liabilities.