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Makaila Glaster-Brown
on Dec 16, 2024

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For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and
(3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?

A) Revenues are overstated by $4,200.
B) Net income is overstated by $2,300.
C) Expenses are overstated by $6,500.
D) Expenses are understated by $3,500.

Adjusting Entries

Transactions recorded at the end of the accounting interval to appropriately allocate profits and expenditures to the period they originated.

Unearned Revenue

Income received by a company for goods or services yet to be provided or delivered; it is recorded as a liability on the balance sheet until the service or product is delivered.

Net Income

The total profit or loss of a company after all expenses, taxes, and costs have been subtracted from total revenue.

  • Comprehend the critical role of accurate adjusting entries in maintaining the integrity and adherence of financial statements.
  • Explore the effect that adjusting entries have on the income statement and balance sheet.
  • Understand the principle of matching revenue with expenses and its effect on net income and financial statements.
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SK
Subin Kaimalattu MathewDec 23, 2024
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