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vekshin1
3 years ago
11

During the adjusting process two transactions were missed. The first is for unearned rent revenue of which $450 was earned durin

g the period, the second was for accrued interest payable of which $275 is owed for the period. As a result of these omissions
1. liabilities are overstated by $725.
2. assets are overstated by $725.
3. net income is understated by $175.
4. revenue is overstated by $725.
Business
1 answer:
masya89 [10]3 years ago
4 0

Answer:

3. net income is understated by $175

Explanation:

There were two transactions omitted. The first transaction is unearned rent revenue of which $450 was earned. This earned rent revenue increases income by $450. While the second transaction was accrued interest payable of which $275 is owed. This interest payable increases liabilities by $275.

Therefore, from the above, income or revenue is understated by $450, while expenses is understated by $275.

Therefore, net income is understated by income less expenses, thus 450 - 275 = $175. This also implies that liabilities are overstated by $175.

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