Freeman Contracted to Build a Wooden Garage for Douglas

question 31

Multiple Choice

Freeman contracted to build a wooden garage for Douglas. Before construction began, a local ordinance was enacted prohibiting wooden structures in the zone where the garage was to be located. The agreement is ineffective under the common law because of

• A) rescission.
• B) accord and satisfaction.
• C) release.
• D) impossibility.

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Definitions:

Comprehensive Income

Total change in equity for a reporting period that includes all non-owner changes in equity, not just those resulting from net income.

Net Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, leading to the net income or profit.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash transaction happens.

Revenue Recognition

The accounting principle that dictates the specific conditions under which income becomes realized as revenue.