Question

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would: Multiple Choice Understate net income by $28,000. Overstate net income by $28,000. Have no effect on net income. Overstate assets by $28,000. Understate assets by $28,000.

Answer 1

When there is no adjusting entry for accrued wages of  $28,000  then overstate net income by $28, 000. Thus, the correct answer is B.

What are adjusting entries?

A journal entry made at the conclusion of an accounting period in a company's general ledger to note any unrealized income or expenses for that period is known as adjusting entries.

When any adjusting entry for the accrued expense is not made then the net income is overstated, which means it will reflect in the balance sheet as retained earnings.

Therefore, option B overstated net income by $28,000 is appropriate to answer.

Learn more about adjusting entries, here:

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