Effect of omitting adjusting entry At March 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for March and (b) the balance sheet as of March 31? Also indicate whether the items in error will be overstated or understated. a. Income Statement Insurance Expense Net Income b. Balance Sheet Prepaid Insurance Owner's Equity

Effect of omitting adjusting entry At March 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for March and (b) the balance sheet as of March 31? Also indicate whether the items in error will be overstated or understated. a. Income Statement Insurance Expense Net Income b. Balance Sheet Prepaid Insurance Owner's Equity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following accounts will not be closed to Retained Earnings at the end of the fiscal year? a.Utilities Expense b.Insurance Expense c.Prepaid Insurance d.Fees Earned
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Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $16,741 and unexpired insurance of $4,804, for the fiscal year ending on April 30? a.debit Prepaid Insurance, $11,937; credit Insurance Expense, $11,937 b.debit Insurance Expense, $16,741; credit Prepaid Insurance, $16,741 c.debit Prepaid Insurance, $16,741; credit Insurance Expense, $16,741 d.debit Insurance Expense, $11,937; credit Prepaid Insurance, $11,937
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The income statement for the Splish Brothers Inc. for the month ended July 31 shows Service Revenue $ 17,350, Salaries and Wages Expense $ 9,000, Maintenance and Repairs Expense $ 2,850, and Income Tax Expense $ 1,290. The statement of retained earnings shows an opening balance for Retained Earnings of $ 22,070 and Dividends $ 1,990.
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To ensure that the Allowance for Doubtful Accounts account does not became materially misstated over time, companies revise overestimates of prior periods by Multiple Choice lowering estimates in the current period. recording a retroactive correcting entry increasing estimates in the current period. notifying the users of its financial statements of the error. O
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