Question:In preparing its Year 1 adjusting entries, the XYZ Company neglected to adjust rental fees received in advance from the amount of rental fees earned during Year 1. Which of the following reflects the result of this error? 

A Year 1 net income is understated, the balance in retained earnings is understated, and liabilities are overstated. 
B Year 1 net income is overrated, the balance in retained earnings is overstated, the liabilities are correctly stated. 
C Year 1 net income is understated, the balance in retained earnings is understated, and liabilities are understated. 
D None of these 

+ Answer
D 

+ Explanation
Answer not sure

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Md. Habib Ullah

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