Failure to make an adjusting entry to recognize rent revenue receivable would cause which of the following?
A)An understatement of assets,net income,and stockholders' equity.
B)An overstatement of assets and stockholders' equity and an understatement of net income.
C)No effect on assets,liabilities,net income,or stockholders' equity.
D)An overstatement of assets,net income,and stockholders' equity.

Question

Quizplus · Accepted Answer

Failing to recognize rent revenue receivable would result in an understatement of assets (because the receivable is not recorded), net income (because the revenue is not recognized), and stockholders' equity (because net income flows into retained earnings, which is a component of stockholders' equity).

Failure to Make an Adjusting Entry to Recognize Rent Revenue