At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following is true?
A) total assets will be understated at the end of the current year
B) the balance sheet and income statement will be misstated but the statement of stockholders' equity will be correct for the current year
C) net income will be overstated for the current year
D) total liabilities and total assets will be understated

Question

Quizplus · Accepted Answer

When the adjusting entry for depreciation on equipment is omitted, the net income will be overstated for the current year. This is because depreciation expense is an expense that reduces net income, so omitting it will result in a higher net income than what should actually be reported. The other options are incorrect because the omission of this entry only affects the income statement and not the balance sheet or total liabilities.

At the End of the Fiscal Year, the Usual Adjusting