If a Company Failed to Make the End-Of-Period Adjustment to Move

question 242

Multiple Choice

If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause:

• A) An overstatement of liabilities.
• B) An overstatement of assets.
• C) An understatement of liabilities.
• D) An overstatement of net income.
• E) An overstatement of equity.

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Definitions:

Bondholders

Bondholders are investors or entities that hold bond investments, and thus are creditors to the issuer of the bond, entitled to interest payments and repayment of principal.

Gain or Loss

This refers to the financial result that occurs when the selling price of an asset differs from its original purchase price, either higher (gain) or lower (loss).

Bonds

Fixed income investment products that represent loans made by an investor to a borrower, typically corporate or governmental.

Effective Interest Method

A technique used in accounting for amortizing the cost of a bond premium or discount over the life of the bond in a way that results in a constant rate of interest over the period.