If Rent for 2012 Is Paid in Advance During 2011

question 107

Multiple Choice

If rent for 2012 is paid in advance during 2011 but is mistakenly debited to Rent Expense in 2011,

• A) Net income for 2011 will be overstated
• B) There will be no error in 2011 net income
• C) Net income for 2011 will be understated
• D) The answer cannot be determined from the information given

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Definitions:

Current Liabilities

A company's obligations or debts that are due within a year or within its operating cycle.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year or within the operating cycle of the business, whichever is longer.

Ratio of Debt

A financial metric that measures the amount of debt a company has compared to its assets or equity, indicating the financial leverage or risk.

Accounting System

A systematic process of recording, reporting, and analyzing financial transactions of a business.