Question

If a company fails to record accrued interest revenue at the end of its fiscal year, all else being equal, what are the effects on its net income, total assets, total liabilities, and total stockholders' equity?

Net income:
A. overstated
B. understated
C. no effect

Total assets :
A. overstated
B. understated
C. no effect

Total liabilities:
A. overstated
B. understated
C. no effect

Total stockholders' equity:
A. overstated
B. understated
C. no effect

Answer 1

Net income: Understated

Total assets: Understated

Total liabilities: No effect

Total stockholders' equity: No Impact

Step-by-step explanation:

Net income will be understated, because, revenue was not accrued.

Total assets will also be understated, because accrued revenue is not recorded in the current assets, thus total assets will be lowered in total.