What Is the Effect on the 2010 Financial Statements When

question 111

Multiple Choice

What is the effect on the 2010 financial statements when a capital expenditure during 2010 was incorrectly recorded as a revenue expenditure?

• A)The financial statements aren't affected.
• B)Assets and net income are both overstated.
• C)Assets are overstated and net income was understated.
• D)Assets and stockholders' equity are both understated.

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Definitions:

Net Operating Income

A company's operating income after all operating expenses have been deducted from total revenue.

Variable Costing

A costing method that includes only variable costs - costs that vary with production levels - in the cost of goods sold and excludes fixed costs.

Net Operating Income

The profit generated from a company's everyday business operations, indicating the efficiency of management.

Net Operating Income

Income generated from a company's everyday business operations, excluding taxes and interest expenses.