The Adjusting Entry to Adjust Supplies Was Omitted at the End

question 161

Multiple Choice

The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income statement by having

• A) expenses understated and therefore net income overstated
• B) revenues understated and therefore net income understated
• C) expenses understated and therefore net income understated
• D) expenses overstated and therefore net income understated

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Definitions:

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, including rent, salaries, and equipment depreciation.

Deferred

A term referring to expenses or incomes that have been recorded but not yet incurred or realized, impacting future periods.

Inventories

The complete list of items such as merchandise, raw materials, and finished goods that a company holds for sale or production.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed manufacturing overhead as a period cost.