If a Company Mistakenly Forgot to Record Depreciation on Office

question 83

Multiple Choice

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

• A) Assets, net income, and equity understated.
• B) Assets overstated and equity understated.
• C) Assets and equity both understated.
• D) Assets, net income, and equity overstated.
• E) Assets overstated, net income understated, and equity overstated.

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid or received in cash.

Adjusting Entry

An accounting record made to adjust income or expenditure in accounts to reflect the accrual basis of accounting properly.

Stockholders' Equity

The ownership claim on a corporation's assets that remains after all liabilities are accounted for, denoting shareholder interest.