If Prepaid Expenses Are Initially Recorded in Expense Accounts and Have

question 94

Multiple Choice

If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, the failure to make an adjusting entry will cause

• A)assets to be understated.
• B)assets to be overstated.
• C)expenses to be understated.
• D)contra-expenses to be overstated.

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Definitions:

Compounded Annually

Interest computed annually on the initial sum as well as on the interest accrued in past periods.

Professional Hockey

A sport involving two teams of skaters using sticks to shoot a puck into the opponent's net, played at a professional level.

Investments

Assets or items acquired with the goal of generating income or appreciation over time.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.