True North Real Estate Management failed to adjust its Unearned Rent Revenue account for the $25,000 that had been earned during the current year. What effect does this omission have on the current year financial statements?
A) Assets are understated by $25,000.
B) Revenues are overstated by $25,000.
C) Expenses are understated by $25,000.
D) Liabilities are overstated by $25,000.

Question

Quizplus · Accepted Answer

The omission means that the Unearned Rent Revenue, a liability, was not reduced by the $25,000 that was earned, thus overstating liabilities.

True North Real Estate Management Failed to Adjust Its Unearned