An Architecture Firm Earned $2000 for Architecture Services Provided with the Fee

question 31

Multiple Choice

An architecture firm earned $2000 for architecture services provided with the fee to be paid in the future.Nothing was recorded at the time the service was provided.If the fee has not been paid by the end of the accounting period and no adjustment is made this would cause:

• A)revenues to be overstated.
• B)net income to be overstated.
• C)liabilities to be understated.
• D)revenues to be understated.

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Definitions:

Marginal Tax Rate

The tax rate that applies to the last dollar of the taxpayer's income or the next dollar of taxable income earned.

Net Investment

Total amount spent on acquiring, maintaining, or improving capital assets, minus any sales of these assets.

Marginal Tax Rate

The rate of tax applied to the last dollar of income, representing the percentage of tax paid on additional income.

Salvage Value

The projected value at which an asset can be sold upon reaching the end of its operational lifespan.