A Company Made No Adjusting Entry for Accrued and Unpaid

question 181

Multiple Choice

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:

• A) Understate net income by $28,000.
• B) Overstate net income by $28,000.
• C) Have no effect on net income.
• D) Overstate assets by $28,000.
• E) Understate assets by $28,000.

---

Definitions:

Acquisition-Date Fair Value

The value of an asset or liability at the time of acquisition, determined according to applicable accounting standards for fair value measurement.

Controlling Interest

Ownership of a sufficient portion of a company's stock to dictate policies and make management decisions, typically over fifty percent.

Noncontrolling Interest

A portion of the equity in a subsidiary not directly owned by the parent company, reflecting the minority shareholders' interest in the subsidiary.

Excess Amortization Expenses

Costs that are higher than expected for the amortization of intangible assets, sometimes indicating an overly aggressive depreciation of these assets.