The Year-End Adjustment to Recognize One Month's Work on the Three-Month

question 28

Multiple Choice

The year-end adjustment to recognize one month's work on the three-month contract results in a $2,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue) .
The following account balances were drawn from the 2016 financial statements of Grayson Company:

-Jason Company paid $7,200 for one year's rent in advance beginning on October 1,2015.Jason's 2015 income statement would report rent expense,and its statement of cash flows would report cash outflow for rent,respectively,of

• A)$7,200;$7,200
• B)$1,800;$1,800
• C)$1,800;$7,200
• D)$1,200;$7,200

---

Definitions:

Finke's Principle

A theoretical proposition related to the creative process, emphasizing the role of imagined images and scenarios in generating innovative solutions or products.

Transformational Equivalence

The ability to recognize that an object or problem can be represented in different ways while retaining its core properties or meaning.

Empirical Evidence

Information acquired by observation or experimentation that serves as the basis for knowledge or justification.

Mental Images

Visual representations in the mind of an object or scene which are not currently being sensed but recalled or imagined.