Which of the following would overstate a company's net income?
A)Counting shipments of customers' orders as revenue before payment has been received.
B)Shipping goods to customers without receiving orders from those customers,and recording the transactions as revenue.
C)Accruing liabilities for marketing expenses before they are incurred.
D)Making an accrual adjusting entry for interest earned on a bond investment.

Question

Quizplus · Accepted Answer

Managers at Bausch & Lomb shipped as much as two years' worth of contact lenses to opticians who hadn't even ordered them.These shipments were counted as sales revenue,which overstated net income.Reporting revenue before cash is received and accruing interest earned would increase net income and is in accordance with GAAP.Accruing liabilities before they are incurred would decrease net income and is not in accordance with GAAP.

Which of the Following Would Overstate a Company's Net Income