If a Company Fails to Adjust a Prepaid Rent Account

question 83

Multiple Choice

If a company fails to adjust a Prepaid Rent account for rent that has expired,what effect will this have on that month's financial statements?

• A)Failure to make an adjustment does not affect the financial statements.
• B)Assets will be overstated and profit and shareholders' equity will be understated.
• C)Assets will be overstated and profit and shareholders' equity will be overstated.
• D)Expenses will be overstated and profit and shareholders' equity will be understated.

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Definitions:

Studying

The act of applying one's mind purposefully to the acquisition of knowledge or understanding of a subject.

Entity Theorists

Those who believe that traits are fixed, stable things (entities) and thus people should not be expected to change.

Incremental Theorists

Those who believe that traits are subject to change and improvement.

Learned Helplessness

Belief that one’s actions will not bring about desired outcomes, leading one to give up and quit trying.