If a Revenue Expenditure Is Incorrectly Recorded on a Company's

question 145

Multiple Choice

If a revenue expenditure is incorrectly recorded on a company's books as a capital expenditure,which of the following statements will be true?

• A)Stockholders' equity will be overstated at year end.
• B)Net income in the following year will be unaffected.
• C)Total assets will be understated at year end.
• D)Net income will be understated for the year.

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Definitions:

Uncollectible Accounts

Accounts receivable that a company has determined are unlikely to be collected and written off as an expense.

Allowance for Doubtful Accounts

An accounting concept used to estimate the portion of accounts receivable that may not be collected.

Net Credit Sales

The total revenue from sales made on credit, after subtracting returns and allowances.

Uncollectible Accounts

Accounts receivable that a company does not expect to receive payment for, often written off as bad debts.