Nobells Corp

question 56

Multiple Choice

Nobells Corp. has acquired land and paid an amount of $500 as brokerage to acquire the land. However, the company's accountant has recorded the $500 as a revenue expenditure. What is the effect of this error?

• A)Net income is understated by $500.
• B)Liabilities are overstated by $500.
• C)Revenue is overstated by $500.
• D)Assets are overstated by $500.

---

Definitions:

Conditional Sales Agreement Lease

A financial arrangement where the lessee acquires an asset under a lease agreement but only becomes the owner upon full payment of the lease.

Secured Loan

A loan backed by collateral, reducing the risk for the lender and often resulting in a lower interest rate for the borrower.

Leveraged Lease

A lease agreement where the lessor uses borrowed funds to purchase an asset which is then leased to the lessee, allowing for tax benefits and risk-sharing.

Nonrecourse

A type of loan where the lender’s recovery is limited to the collateral pledged for the loan, with no further claim against the borrower in case of default.