Question

Part 1

Required Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign. Not all cells require input.)

Paid $4,800 cash in advance on October 1 for a one-year insurance policy.

Received a $3,600 cash advance for a contract to provide services in the future. The contract required a one-year commitment, starting April 1.

Purchased $1,200 of supplies on account. At year’s end, $175 of supplies remained on hand.

Paid $9,600 cash in advance on August 1 for a one-year lease on office space.

Answer 1

Transaction	General Journal	Debit	Credit
1	Prepaid insurance	4800
	Cash		4800
2	Cash	3600
	Unearned income		3600
3	Purchases	1200
	Accounts payable		1200
4	COGS	1025
	Ending inventory	175
	Purchases		1200
5	Prepaid office rent	9600
	Cash		9600

Assets	=			Stockholder's Equity
Event	Cash	+	Other Assets	=	Liabilities.	+	Common Stock	-	Retained Earnings
a.	(4,800)	+	4,800	=		+		-
a. Adjustment 4800/12*3		+	(1,200)	=		+		-	(1,200)
b.	3,600	+		=	3,600	+		-
b. Adjustment 3600/12*9		+		=	(2,700)	+		-	2,700
c.	(1,200)	+	1,200	=		+		-
c. Adj. 1200-175			(1,025)						(1,025)
d.	(9,600)	+	9,600	=		+		-
d. Adj. 9600/12*5		+	(4,000)	=		+		-	(4,000)
	(12,000)	+	9,375	=	900		-		(3,525)