Question

8 pt X Company prepares monthly financial statements. The company received its bill from the utility company in June ut did not pay it until July. Its accountant failed to record the utility expense in June, but instead recorded it in July when it was paid. As a result, which of the following is true regarding 1) total assets on June 30 2) total liabilities on June 30 3) Net Income for June 9.AO 1) understated; 2) understated; 3) correct BO 1) overstated; 2) correct; 3) overstated CO 1) understated; 2) overstated; 3) correct DO 1) correct; 2) understated; 3) overstated EO 1) correct; 2) correct; 3) understated FO 1) overstated; 2) overstated; 3) understated

Answer 1

Adjusting entry for utilities expense payable would be:

Journal

	Utilities expense
	Utilities expense payable

If the above adjusting entry is not made in the month of June, it would have the following affects:

Assets would not be affected due to non recording of above adjusting entry.

Liabilities for the month of June would be understated since Utilities expense payable is a liability and it was not recorded.

Net income for the month of June would be overstated since Utilities expense has not been recorded.

Correct option is (D)

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