At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements 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 retained earnings statement 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

Since depreciation expense was not recorded, net income will be overstated for the current year. This is because the expense was not recognized, leading to an overstatement of the current year's earnings. The other options are not correct because they do not accurately reflect the impact of the omitted adjusting entry.

At the End of the Fiscal Year, the Usual Adjusting