In preparing the financial statements for December 31, 2016, an accountant improperly classified the payment of prepaid rent as rent expense.Which of the following amounts would not be affected by this improper classification?
A) Retained earnings, January 1, 2016
B) Retained earnings, December 31, 2016
C) Net income
D) Total assets

Question

Quizplus · Accepted Answer

Prepaid rent is a non-cash asset and the misclassification as rent expense will affect the income statement by overstating the expenses and understating the net income. This misclassification will not affect retained earnings at the beginning or end of the year or the total assets.

In Preparing the Financial Statements for December 31, 2016, an Accountant