A Cash Payment Was Made to Pay for Delivery Expenses

question 86

Multiple Choice

A cash payment was made to pay for delivery expenses, but was mistakenly charged to Advertising Expense. What effect will this have on the trial balance?

• A)Advertising Expense will be understated.
• B)Delivery Expense will be overstated.
• C)The trial balance will still balance.
• D)Cash will be overstated.

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Definitions:

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, leading to an imbalance and potentially unfair outcomes.

Insured Drivers

Individuals who have obtained an insurance policy that covers them against financial loss or liability resulting from car accidents or theft.

Allocative Efficiency

The state of resource allocation where goods and services are distributed according to consumer preferences and utility maximization.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive.