If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Expenses will be overstated and net income and stockholders’ equity will be understated.

Assets will be overstated and net income and stockholders’ equity will be understated.

Assets will be overstated and net income and stockholders’ equity will be overstated.

Failure to make an adjustment does not affect the financial statements.

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

False

True