If a company mistakenly forgot to record depr depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: Multiple Choice Assets, net income, and equity understated. Assets, net income, and equity overstated. Assets and equity both understated. Assets overstated and equity understated. Assets overstated, net income understated, and equity overstated.

Question

If a company mistakenly forgot to record depr depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: Multiple Choice Assets, net income, and equity understated. Assets, net income, and equity overstated. Assets and equity both understated. Assets overstated and equity understated. Assets overstated, net income understated, and equity overstated.

Answer 1

The correct answer is:**Assets, net income, and equity overstated.**### Explanation:1. **Depreciation** is an expense that reduces the value of assets over time to reflect their usage or wear and tear. If depreciation is not recorded: - The **asset's book value** (e.g., office equipment) will remain higher than it should be because the reduction in value due to depreciation has not been accounted for. - **Net income** will be overstated because depreciation expense, which reduces income, has not been deducted. - **Equity** (e.g., retained earnings) will also be overstated because net income flows into equity, and an overstated net income inflates equity.2. Therefore, failing to record depreciation results in: - Overstated **assets** (since the accumulated depreciation is missing). - Overstated **net income** (because expenses are understated). - Overstated **equity** (due to inflated net income).

Problemas

Roztwór

Respuesta