At the end of the fiscal year the usual adjusting entry for depreciation on equipment was omitted. Which of the following is true? A. Net income will be overstated for the current year B. The balance sheet and income statement will be misstates but the statement of stockholders equity will be correct for the current year
At the end of the fiscal year the usual adjusting entry for depreciation on equipment was omitted. Which of the following is true? A. Net income will be overstated for the current year B. The balance sheet and income statement will be misstates but the statement of stockholders equity will be correct for the current year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the fiscal year the usual adjusting entry for depreciation on equipment was omitted. Which of the following is true?
A. Net income will be overstated for the current year
B. The balance sheet and income statement will be misstated but the statement of stockholders equity will be correct for the current year
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### Explanation:
This section discusses the impact of omitting the usual adjusting entry for depreciation at the end of a fiscal year. It presents two statements regarding financial reporting:
- **Option A:** This option suggests that without accounting for depreciation, net income will appear higher than it should be because depreciation is an expense that reduces net income.
- **Option B:** This implies that both the balance sheet and the income statement will be incorrect due to this omission. However, it states that the statement of stockholders' equity would remain unaffected for the current year.
This content would be suitable for an educational website focused on accounting principles, demonstrating the importance of accurate financial reporting and the implications of missing entries.
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