Question

Southern Company's accountant failed to accrue as of 12/31/19 some employee fringe benefit program expenses that were incurred in 2019 and that will be paid in 2020. The result of this omission is to: _________.

A. overstate 2019 net income and understate non current liabilities at 12/31/19.
B. understate 2019 expenses and understate current liabilities at 12/31/19.
C. understate 2019 expenses and overstate current liabilities at 12/31/19.
D. understate 2019 net income and overstate assets at 12/31/19.

Answer 1

B. understate 2019 expenses and understate current liabilities at 12/31/19.

Step-by-step explanation:

By not accruing for some employee fringe benefit program expenses that were incurred in 2019, the company has recorded less expenses than it should have and hence understated expenses and effectively overstated net income.

In the same, the accrued expenses should have formed part of current liabilties since they would be paid in less than or a year's time, hence, the correct choice is the one stated that expenses and current liabilities would be understated