Question

Lune s on the balance sheet as of December 31, 2011 $4,300 $2,200 $4,600 $4,800 None of the above. of the following adjusting entries, which one results in an increase in liabilities? ay to record earned portion of rent previously received in advance from a tenant and initially recorded as a liability The entry to write off a portion of unexpired insurance initially recorded as an asset. The entry to record interest accrued on a note receivable. D. The entry to record revenue earned but not yet collected or recorded. None of the above. E. 22 The CPA firm auditing Dom Company found that net income had been understated. Which of the following errors could be the cause? Failure to record payment of an account payable on the last day of the year. Failure to make an adjusting entry to record interest accrued on a note receivable. No entry made to record purchase of land for cash on the last day of the year. Failure to record depreciation expense for the period. None of the ahur

Answer 1

Answer to Question No. 21

Correct Option: None of the above.

The below entries would have the following effect on Liabilitis:

1. The entry to record earned portion of rent previously received in advance from a tenant and initially recorded as a liability – It will decrease liability and increases Stockholders’ Equity, as rent revenue had been earned against Unearned Rent Revenue.
2. The entry to write off a portion of unexpired insurance liability recorded as an asset – No effect on liability and Asset will be decreased by insurance expired.
3. The entry to record interest accrued on a note receivable – Accruing of Interest on Note Receivable will increase Assets and will have no effect on liability.
4. The entry to record revenue earned but not yet collected or recorded – It will increase assets and Stockholders’ Equity and will have no effect on Liability.

Answer to Question No. 22

Correct Option: Failure to make an adjusting entry to record interest accrued on a note receivable.

The reason for understatement of Net Income could be Overstatement of Expenses or understatement of Revenue.

The failure to record interest accrued on Note Receivable is a understatement of Revenue, which would lead to understatement of Net Income.

Failure to record Payment of Account payable, purchase of land doesn’t effect Net Income and failure to record Depreciation expense would lead to overstatement of Net Income.