1. As of January 31, Hudson Corporation owes $600 to U-Rent-It for equipment used during January. If no adjustment is made for this item at January 31, how will Hudson's financial statements be affected?
Cash will be overstated at January 31.
Net income for January will be overstated.
Stockholders' equity will be understated.
The financial statements will be accurate since the $600 does not have to be paid yet
2. Which of the following is not an application of the accrual basis of accounting?
Recording advertising fees earned at the time the work is done.
Recording advertising fees earned at the time the cash payment is received.
Recording advertising expense in the period in which the work is done.
Adjusting unearned advertising fees to the proper balance at the end of the month