Question

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: Select one: a. Assets overstated and equity understated. b. Assets and equity both understated. c. Assets overstated, net income understated, and equity overstated. d. Assets, net income, and equity understated. e. Assets, net income, and equity overstated.

Answer 1

Answer: Assets, net income, and equity overstated.

Explanation: Depreciation can be defined as the decline in value of assets.

A mistake to record depreciation which is the decline in value in asset will significantly affect the account records. If the asset in a financial record is overstated, the net income and equity are also overstated because the asset is used in calculation of net income and equity.