Wave Inn Is a Resort Located in Canada

question 118

Multiple Choice

Wave Inn is a resort located in Canada.Wave Inn collects cash when guests make a reservation.During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing revenue.By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012.The adjusting entry required at December 31, 2011 would impact the statement of financial position by

• A)Decreased Equity $40,000.
• B)Decreased Liabilities $40,000.
• C)Increased Assets $60,000.
• D)Increased Equity $20,000.

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