A Company Shows a $600 Balance in Prepaid Rent in the Unadjusted

question 156

Multiple Choice

A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:

• A) $200 of prepaid insurance.
• B) $200 difference between the debit and credit columns of the Unadjusted Trial Balance.
• C) An error in the financial statements.
• D) $200 decrease in net income.
• E) $200 increase in net income.

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Definitions:

Budgeted Direct Materials Purchases

The estimated total cost of direct materials a company plans to buy for its production process, based on forecasted production levels.

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period.

Financial Budgets

Detailed plans that outline an organization's financial goals, expected revenues, and expenses for a specific period.

Cash Budget

A budget that estimates the expected receipts (inflows) and payments (outflows) of cash for a period of time.