Which of the Following Will Occur If an Adjusting Entry

question 53

Multiple Choice

Which of the following will occur if an adjusting entry to record an accrued but unrecorded liability is NOT made?

• A) Both expenses and liabilities will be understated.
• B) Both expenses and liabilities will be overstated.
• C) Expenses will be understated, but liabilities will be overstated.
• D) Liabilities will be understated, but expenses will be overstated.

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Definitions:

Stock Selection Return

The return generated from choosing specific stocks to outperform the market or a segment of the market.

Benchmark

A standard or point of reference against which the performance of a security, investment portfolio, or asset manager can be measured.

EAFE

An acronym for Europe, Australasia, and Far East, often used in reference to a stock index that represents major foreign markets.

Interest Rate Parity Theory

This theory suggests that the difference between the exchange rates of two currencies is equal to the ratio of the interest rates between those two countries, thereby preventing arbitrage opportunities.