Assume That a House Is Rented by Four Students

question 65

Multiple Choice

Assume that a house is rented by four students.When it comes to keeping the house clean,each of the four roommates has an incentive to leave the cleaning to the others.As a result,the house is never clean.Which of the following is the best solution to this problem of free riding?

• A) Asking every roommate to clean the house if they dirty it
• B) Requiring every roommate to contribute to a cleaning service
• C) Requiring each roommate to pay more toward the house rent and groceries
• D) Assigning one roommate the responsibility of watching over the other students

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Definitions:

Treasury Stock

This refers to shares of stock that were issued and later reacquired by the issuing corporation. It is often held to utilize in future acquisitions or to reissue to employees as part of compensation packages.

Par Common Stock

The nominal or face value assigned to a share of common stock by the company's charter.

Prior Period Adjustment

An adjustment made to the financial statements to correct an error found in a period that has already been reported.

Depreciation Expense

Depreciation expense represents the systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or other reductions in value.