Cara, Inc.purchased a building on January 1, 2011 for ₤ 500,000.The useful life of the building is 10 years.The asset is reported on the December 31, 2011 statement of financial position at ₤ 450,000.What was the impact of the adjusting entry recorded by Cara, Inc.?

Question

Quizplus · Accepted Answer

The adjusting entry recorded by Cara, Inc. decreased the reported value of the building by ₤ 50,000 (the difference between the cost of the building and the amount it was reported on the financial statements), which in turn reduced the amount of equity by the same amount. Therefore, the correct answer is A. None of the other options are correct.

Cara, IncPurchased a Building on January 1, 2011 for ₤ 500,000