Bread Basket Provides Baking Supplies to Restaurants and Grocery Stores

question 16

Multiple Choice

Bread Basket provides baking supplies to restaurants and grocery stores.During December 2011, Bread Basket's employees worked 2,400 hours at an average rate of €10 per hour.At December 31, 2011, Bread Basket has paid €11,000 of salary expense.If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2011 statement of financial position?

• A)Equity is overstated by € 11,000.
• B)Equity is understated by € 13,000.
• C)Liabilities are understated by € 13,000.
• D)Liabilities are overstated by € 11,000.

---

Definitions:

Hidden Action

A situation in contract theory and economics where one party's action is not observed or cannot be monitored by another, potentially leading to moral hazard.

Moral Hazard

The situation in which one party engages in risky behavior knowing that it is protected against the consequences, usually due to a contract or agreement.

Criminal Actions

Activities that are punishable by law, typically involving harm to individuals or the society at large.

Top Managers

Senior executives responsible for making strategic decisions and overseeing the overall operations of an organization.