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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