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Expiration of Prepaid Rent

The person keeping the financial records forgot to record the expiration of prepaid rent during the current year. The result of this error is that:
Net Income Owners' Equity Assets
A) overstated understated understated
B) overstated overstated overstated
C) overstated understated no effect
D) no effect no effect no effect

Please select one of the following answers stated above.

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Solution Preview

Please see the attached file.
<br>Correct answer: B.
<br>When the expiration of the prepaid rent is finally recorded the following occurs:
<br>Rent ...

Solution Summary

This solution analyzes the impact on net income, owner's equity and assets when expired prepaid rent is not recorded.