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