Recognizing a Loan Received as Revenue Instead of as a Liability

question 58

Multiple Choice

Recognizing a loan received as revenue instead of as a liability has a positive effect on the reported financial statements for all of the following except:

• A)It understates liabilities.
• B)It overstates revenues.
• C)It overstates net income.
• D)It understates expenses.

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Definitions:

Lessor

The party that owns a property and allows another party to use it in exchange for rent, typically under the terms of a lease agreement.

Vacant Possession

A term in property law ensuring that a property is empty and available for the new owner or tenant at the time of sale or lease.

Quiet Enjoyment

A tenant's right to possess and use a property without interference from the landlord or other third parties claiming ownership.

Fee Simple

The most extensive interest in real property, providing the owner with full ownership rights indefinitely.