Carrington & Co

question 147

Multiple Choice

Carrington & Co.rented office space to a tenant on January 31 and received a total of $9,000 for the first three months of rent.The amount was recorded as Rent Collected in Advance when received.Adjustments are recorded only at the end of every quarter.What effect does the adjustment at March 31 have on Carrington's net income for the quarter ending March 31?

• A)Increase by $9,000
• B)Decrease by $6,000
• C)Decrease by $3,000
• D)Increase by $6,000

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Definitions:

Paid-In Capital

Total amount of cash and other assets paid into the corporation by stockholders in exchange for capital stock.

Stock Dividend

A company rewards its shareholders with extra shares, foregoing the option to distribute cash.

Depreciation Expense

Allocating the price of a tangible asset consistently throughout its expected lifespan.

Prior Period Adjustment

An amendment to the financial statements, correcting errors from previously reported periods or adjustments due to changes in accounting policies.