If the adjusting entry to accrue interest of $1,000 on a note receivable is omitted,then:
A)assets,net income,and stockholders' equity are overstated by $1,000.
B)assets,net income,and stockholders' equity are understated by $1,000.
C)liabilities are understated by $1,000,net income is overstated by $1000,and stockholders' equity is overstated by $1,000.
D)assets are overstated,net income is understated,and stockholders' equity is understated.

Question

Quizplus · Accepted Answer

The adjusting entry to accrue the interest earned includes a debit to Interest Receivable (to increase that asset account).and a credit to Interest Revenue (to increase that revenue account)for $1,000.If that entry is not made,assets will be understated and net income will be understated.As a result,stockholders' equity will also be understated.

If the Adjusting Entry to Accrue Interest of $1,000 on a Note