At the End of the Fiscal Year, the Usual Adjusting

question 166

Multiple Choice

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true?

• A) Net income will be overstated for the current year.
• B) Total assets will be understated at the end of the current year.
• C) The balance sheet and income statement will be misstated but the Retained Earnings statement will be correct for the current year.
• D) Total expenses will be overstated at the end of the current year.

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Definitions:

Liquidity Ratios

Financial metrics used to determine a company's ability to pay off its short-term debts with its liquid assets, critical for assessing financial health.

Asset Management Ratios

Financial metrics that assess how efficiently a company is using its assets to generate revenue, including turnover ratios for receivables, inventory, and assets.

Leverage Ratios

Financial metrics used to assess the degree of debt in a company's capital structure and its ability to meet financial obligations.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods within a given period.