Question

. Amortization of a patent was ignored. This error would cause A. the period’s net income to be overstated. B. the period’s net income to be understated. C. the period end assets to be understated. D. None of the above

Answer 1

A. The period's net income to be overstated. Amortization refers to the process of using a predetermined schedule to pay off a debt. It can also mean spreading out of capital expenditures over a period of time (for intangible assets). In the event that the amortization is ignored, the respective payments will not be deducted and as a result, net income will be overstated.