If Prepaid Rent Expense for the period is NOT adjusted:
A) assets will be overstated and expenses will be overstated.
B) assets will be overstated and expenses will be understated.
C) assets will be understated and expenses will be overstated.
D) revenue will be understated and expenses will be understated.

Question

Quizplus · Accepted Answer

If Prepaid Rent Expense for the period is not adjusted, the prepaid rent (an asset) remains higher than it should be, leading to assets being overstated. Since the expense has not been recognized, expenses will be understated.

If Prepaid Rent Expense for the Period Is NOT Adjusted