The Accountant for Barnes Architectural Services Failed to Make an Adjusting

question 110

Multiple Choice

The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense.Which of the following is TRUE?

• A) Total revenue is overstated.
• B) Total revenue is understated.
• C) Total expenses are overstated.
• D) Total expenses are understated.

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Definitions:

Natural Monopoly

A situation in the market where due to high initial costs and substantial economies of scale, a single firm can supply a product or service at a lower cost than any potential competitor, leading to a market dominated by one supplier.

Network Effects

Increases in the value of a product to each user, including existing users, as the total number of users rises.

Rent-seeking Behavior

Activities undertaken by individuals or firms to increase their own wealth without creating new wealth, often through manipulating the social or political environment in which economic activities occur.

X-inefficiency

X-inefficiency occurs when a firm lacks the incentive to control costs, leading to inefficiency and higher expenditure than is necessary for the level of output produced.