If XYZ Corp

question 55

Multiple Choice

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

• A)This will have no effect on the financial statements.
• B)Expenses will be overstated and net income and shareholders' equity will be understated.
• C)Assets will be overstated and net income and shareholders' equity will be understated.
• D)Assets will be overstated and net income and shareholders' equity will be overstated.

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Definitions:

Property Taxes

Taxes assessed on real estate by local government, based on the property's assessed value.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Maintenance

The routine tasks and repairs conducted to keep equipment, buildings, or machinery in working order and prevent its deterioration.

Utilities

Services provided to the public or households such as water, electricity, natural gas, sewage treatment, and telecommunications, often subject to government regulations and possibly eligible for tax deductions in certain business contexts.