In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record: 1. $3,200 of insurance coverage that had expired (this $3,200 cost had been initially debited to the Prepaid Insurance account). 2. $2,000 of accrued salaries expense. As a result of these two oversights, the financial statements for the reporting period will [choose one]: a. Understate assets by $3,200. c. Understate net income by $2,000. b. Understate expenses by $5,200. d. Overstate liabilities by $2,000.
In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record: 1. $3,200 of insurance coverage that had expired (this $3,200 cost had been initially debited to the Prepaid Insurance account). 2. $2,000 of accrued salaries expense. As a result of these two oversights, the financial statements for the reporting period will [choose one]: a. Understate assets by $3,200. c. Understate net income by $2,000. b. Understate expenses by $5,200. d. Overstate liabilities by $2,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In making
1. $3,200 of insurance coverage that had expired (this $3,200 cost had been initially debited to the
Prepaid Insurance account).
2. $2,000 of accrued salaries expense.
As a result of these two oversights, the financial statements for the reporting period will [choose one]:
a. Understate assets by $3,200. c. Understate net income by $2,000.
b. Understate expenses by $5,200. d. Overstate liabilities by $2,000.
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