On December 31, 2018, special insurance costs, incurred but unpaid, were not recorded. If these insurance...
On December 31, 2018, special insurance costs, incurred but unpaid, were not recorded. If these insurance costs were related to work in process, what is the effect of the omission on accrued liabilities and retained earnings in the December 31, 2018 balance sheet?
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Accrued Liabilities |
Retained Earnings |
| A. |
|
||||
| B. |
|
||||
| C. |
|
||||
| D. |
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Homework Answers
Option D. is correct answer.
Explanation: Due to non booking of liabilities, accrued liabilities will be understated. But there will be no effect on retained earnings because insurance cost on work in process will be capitalized with work in process.
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