On April 1, Year 1, Maine Corporation paid $9,400 cash in advance for a one-year lease on an office building. Assume that Maine records the prepaid rent as an asset and that the books are closed on December 31. Required a. Show the payment for the one-year lease and the related adjusting entry to recognize rent expense in the accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.) Event Paid rent in advance Adjusting rent expense Totals Event/ Adjustment 8. a Ad b Adj C Adj d Adj e a. Cash Decrease Event/ Adjustment MAINE CORPORATION Accounting Equation for Year 1 Assets Liabilities 0 Net Income Direction of Amount of Change Change Adj. b. Adj. C. Adj. d. Adj. e. Adj. f. Adj. 9. Adj. h. Adj. i. Adj. Prepaid Rent - a. Paid $2,800 cash on October 1 to purchase a one-year insurance policy. b. Purchased $1,450 of supplies on account. Paid $750 cash on accounts payable. The ending balance in the Supplies account, after adjustment, was $400. c. Provided services for $7,800 cash d. Collected $9,300 in advance for services to be performed in the future. The contract called for services to start on May 1 and to continue for one year. e. Accrued salaries amounting to $3,100. f. Sold land that cost $17,800 for $17,800 cash. g. Acquired $55.000 cash from the issue of common stock. h. Earned $11,900 of revenue on account. Collected $10,710 cash from accounts receivable. 1. Paid cash operating expenses of $1,750. WO 700 0 -> Decrease Cash Flows from Operating Activities Direction of Amount of Change Change 2.800 Decrease + 0. S Net Income Direction of Amount of Change Change Stockholders' Equity Retained Earnings Common Stock + 700 0. -0 Cash Flows from Operating Activities Direction of Amount of Change Change $ 2,800 Decrease
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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