If a Company Fails to Adjust a Prepaid Rent Account

question 132

Multiple Choice

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

• A) Failure to make an adjustment does not affect the financial statements.
• B) Expenses will be overstated and profit and owner's equity will be understated.
• C) Assets will be overstated and profit and owner's equity will be understated.
• D) Assets will be overstated and profit and owner's equity will be overstated.

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Definitions:

Adjustment Refusal Closing

A formal written communication rejecting a request for changes or modifications to terms, agreements, or service.

Positive Comment

A remark or feedback expressing approval, appreciation, or encouragement.

Negative Apology

An apology that may come across as insincere or that shifts blame, potentially exacerbating the situation instead of mitigating it.

Negative Announcement Closing

The concluding part of a message that delivers unfavorable news, aiming to end on a positive or hopeful note despite the adverse information.