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

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 net income for the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: C

If a company incorrectly records a payment as an expense instead of an asset, how will this error affect net income in the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: A

The statement of stockholders' equity includes which of the following for the period?

A) Details of a company's profitability that represents stockholders' claims.

B) Changes in stockholders' equity accounts.

C) Inflows and outflows of cash that benefit stockholders.

D) Current assets available to pay current liabilities to reduce risk to stockholders.

Answer: B