On January 2, year 2, Air, Inc. agreed to pay its former president $300,000 under a deferred compensation arrangement. Air should have recorded this expense in year 1 but did not do so. Air's reported income tax expense would have been $70,000 lower in year 1 had it properly accrued this deferred compensation. In its December 31, year 2 financial statements, Air should adjust the beginning balance of its retained earnings by a
a. $230,000 credit.
b. $230,000 debit.
c. $300,000 credit.
d. $370,000 debit.
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Home » Business » On January 2, year 2, Air, Inc. agreed to pay its former president $300,000 under a deferred compensation arrangement. Air should have recorded this expense in year 1 but did not do so.