Petite Inc

Multiple Choice

Petite Inc. pays its rent of $57,000 annually on January 1 and records the expenditure as an asset. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

A) Failure to make the adjustment does not affect the February financial statements.
B) Expenses will be overstated by $4,750 and net income and owner's equity will be understated by $4,750.
C) Assets will be overstated by $9,500 and net income and owner's equity will be understated by $9,500.
D) Assets will be overstated by $4,750 and net income and owner's equity will be overstated by $4,750.