If a Company Fails to Adjust a Prepaid Rent Account

question 141

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 net income and stockholders' equity will be under- stated.
• C)Assets will be overstated and net income and stockholders' equity will be understated.
• D)Assets will be overstated and net income and stockholders' equity will be overstated.

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Definitions:

Personal Qualities

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Welcome Week Dance

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An intense emotional state caused by a perceived imminent threat or danger.