A company made no adjusting for accrued and unpaid employeed salaries of $9000 on december 31....

A company made no adjusting for accrued and unpaid employeed salaries of $9000 on december 31. which of the following statement is true?
a)it will overstament assets and liabilities by $9000
b)it will understate expenses and overstate Net income by $9000
c) it will have no effect on income
d) it will understate assets by $9000

Expert Solution

Answer for the question is -

b) It will understate expenses and overstate Net income by $9000.

1. Journal Entry -

In the above Journal Entries Salaries expense account is getting debited and Salaries Payable account is getting credited.

Income Statement account is getting affected and Liabilities is getting added.

Impact in the Income statement is it will add the expenses and reduced the income. In case of Balance Sheet it will add to the liabilities.

Conclusion -

a) It will overstatement assets and liabilities by $9000 - Wrong because Assets is not getting affected due to the entry.

b) It will understate expenses and overstate Net income by $9000 - Correct

c) It will have no effect on income - Wrong this transaction will affect income.

d) It will understate assets by $9000 - Wrong because assets is not affected due to this transaction.

ekkarill92 answered 2 years ago

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