The Lazarus Company recorded the following adjustment in general journal format: Which of the following choices accurately reflects how this event would affect the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question

The Lazarus Company recorded the following adjustment in general journal format:  Which of the following choices accurately reflects how this event would affect the company's financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The adjustment recorded in the general journal indicates that the company has earned $2,000 in revenue that has not yet been recorded. This means that revenue for the period has been understated by $2,000.

Option A is incorrect because it shows an overstatement of revenue by $2,000, which is the opposite effect of the adjustment recorded in the journal.

Option B is incorrect because it shows an understatement of both revenue and net income by $2,000, which is incorrect. The adjustment recorded in the journal only affects revenue and not expenses, so net income would only be affected if expenses were also adjusted.

Option D is incorrect because it shows an understatement of revenue by $2,000 instead of an overstatement, which is the opposite effect of the adjustment recorded in the journal.

The Lazarus Company Recorded the Following Adjustment in General Journal