At Year-End, It Was Forgotten to Adjust the Asset Prepaid

question 49

Multiple Choice

At year-end, it was forgotten to adjust the asset prepaid rent for the $7,000 rent expense used-up during the year. This will result in an:

• A)understatement of assets and an overstatement of profit and equity.
• B)understatement of assets, profit, and equity.
• C)overstatement of liabilities and an understatement of profit and equity.
• D)overstatement of assets, profit, and equity.

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Definitions:

Hamer v. Sidway

A landmark case in contract law regarding forbearance as consideration, where a promise not to do something can be as legally binding as a promise to do something.

Unforeseen Circumstances

Situations or events that could not have been predicted or expected, often leading to disruptions in agreements or plans.

Preexisting Duty Rule

A legal principle stating that an existing contractual obligation cannot serve as consideration for a new contract.

Bilateral Contract

A bilateral contract is a mutually binding agreement in which each party makes a promise to the other, such as a promise to perform a service in exchange for payment.