Solution: Legaleese Inc. received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered

Problem

Legaleese Inc. received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

a. expenses to be overstated.

b. net income to be overstated.

c. liabilities to be understated.

d. revenues to be understated.