At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?
A) total assets at the end of the year will be understated.
B) stockholders' equity at the end of the year will be understated.
C) net income for the year will be overstated.
D) insurance expense will be overstated

Question

Quizplus · Accepted Answer

Omitting the adjustment for expired insurance means that the insurance expense is not properly recorded for the period. This results in expenses being understated, which in turn causes net income to be overstated because expenses are deducted from revenues to calculate net income.

At the End of the Fiscal Year, the Usual Adjusting