If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect total assets for the current period?

A) Total assets will be too low.

B) Total assets will be correct.

C) Total assets will be too high.

D) Not possible to determine.

Answer: B

If a company incorrectly records Service Revenue too high, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Providing services to customers on account would affect the balances reported in which financial statement(s)?

A) Income statement.

B) Statement of stockholders' equity.

C) Balance sheet.

D) All of the financial statements in the other answers would be affected.

Answer: D