Which of the Following Would Result in an Overstatement in Reported

question 31

Multiple Choice

Which of the following would result in an overstatement in reported net income?

• A)Failure to record $45,000 collection of accounts receivable.
• B)Expensing rather than capitalizing the $12,500 cost of a capital asset.
• C)Failure to record an accrued revenue of $24,000.
• D)Failure to record an accrued expense of $18,000.

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid, respectively.

Accounts Receivable

Funds that customers owe to a business for products or services that have been provided but remain unpaid.

Cash Collected

The total amount of money received by a company during a specific period, usually from its operations or activities.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, culminating in the net profit or loss for that period.