Langdon Company experienced an accounting event that affected its financial statements as indicated below: $$\begin{array} { | c | c | c | c | c | c | c | c | c | c | }
\hline \text { Assets } & = & \text { Liabilities } & + & \text { Equity } & \text { Revenue } & - & \text { Expense } & = & \text { Net income } \
\hline ( 250 ) & = & n / \mathrm { a } & + & ( 250 ) & \mathrm { n } / \mathrm { a } & - & 250 & = & ( 250 ) \
\hline
\end{array}$$ Which of the following transactions could have caused the indicated effects on the company's accounting equation?
A) Goods transferred from work in process to finished goods.
B) Allocation of underapplied overhead to cost of goods sold.
C) Collection of account receivable.
D) Allocation of overapplied overhead to cost of goods sold.

Question

Langdon Company experienced an accounting event that affected its financial statements as indicated below: $$\begin{array} { | c | c | c | c | c | c | c | c | c | c | } 
\hline \text { Assets } & = & \text { Liabilities } & + & \text { Equity } & \text { Revenue } & - & \text { Expense } & = & \text { Net income } \
\hline ( 250 ) & = & n / \mathrm { a } & + & ( 250 ) & \mathrm { n } / \mathrm { a } & - & 250 & = & ( 250 ) \
\hline
\end{array}$$ Which of the following transactions could have caused the indicated effects on the company's accounting equation?
A) Goods transferred from work in process to finished goods.
B) Allocation of underapplied overhead to cost of goods sold.
C) Collection of account receivable.
D) Allocation of overapplied overhead to cost of goods sold.

Quizplus · Accepted Answer

The transaction that caused the indicated effects (decrease in equity due to an increase in expenses without affecting assets or liabilities) is the allocation of underapplied overhead to cost of goods sold. This increases the expense (cost of goods sold), reducing net income and equity, without directly affecting assets or liabilities.

Langdon Company Experienced an Accounting Event That Affected Its Financial