Question:On December 31, 2007, special insurance costs incurred but unpaid were not recorded. If these insurance costs were related to work-in-process, what will be the effect of the omission on accrued liabilities and retained earnings in the December 31, 2007 balance sheet?
Accrued liabilities Retained Earnings 

A No effect No effect 
B No effect Overstated 
C Understated No effect 
D Understated Overstated 

+ Answer
B 

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Zinia Islam

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