If a Company Failed to Make the End-Of-Period Adjustment to Remove

question 210

Multiple Choice

If a company failed to make the end-of-period adjustment to remove from the Unearned Management Fees account the amount of management fees that were earned, this omission would cause:

• A) An overstatement of net income.
• B) An overstatement of assets.
• C) An overstatement of liabilities.
• D) An overstatement of equity.
• E) An understatement of liabilities.

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Definitions:

Variable Overhead Efficiency

Variable overhead efficiency refers to the effectiveness with which a company manages its variable manufacturing overhead costs in relation to its production activities.

Rate Variance

The difference between the expected or standard cost and the actual cost incurred for a particular expense, often analyzed in budgeting and cost management.

Budget Variance

The difference between the budgeted or planned amount of expense or revenue and the actual amount incurred or received.

Denominator Activity

The level of activity used to compute a predetermined overhead rate, representing the total amount of absorption base that is expected to be utilized.