At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following 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 statement of owner's equity 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

If the adjusting entry for depreciation on equipment is omitted, the net income will be overstated for the current year because depreciation expense will not be recorded. As a result, the equipment's cost and accumulated depreciation will be overstated, and total assets will be overvalued. The balance sheet and statement of owner's equity will also be misstated. The omission will not affect total liabilities.

At the End of the Fiscal Year, the Usual Adjusting