The Payment of $20,000 for Expenses Was Incorrectly Recorded by Elite

question 69

Multiple Choice

The payment of $20,000 for expenses was incorrectly recorded by Elite Co.as an increase in cash of $20,000 and a decrease in retained earnings of $20,000.What is the effect of this error on the accounting equation?

• A) Total assets will exceed total liabilities and stockholders' equity by $20,000.
• B) Total assets will exceed total liabilities and stockholders' equity by $40,000.
• C) Total assets will be less than total liabilities and stockholders' equity by $40,000.
• D) The error will not affect the accounting equation.

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