Question

In: Accounting

Performed counseling services for $29,200 cash. On February 1, Year 1, paid $20,400 cash to rent...

Performed counseling services for $29,200 cash.
On February 1, Year 1, paid $20,400 cash to rent office space for the coming year.
Adjusted the accounts to reflect the amount of rent used during the year.

Required
Based on this information alone:
a. Record the events in general ledger accounts under an accounting equation.
b. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period.
c. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2?

Prepare a balance sheet for the Year 1 accounting period. (Do not round intermediate calculations.)

LIFE, INC.
Balance Sheet
As of December 31, Year 1
Assets



Total assets		$0
Liabilities
Stockholders’ Equity


Total stockholders’ equity		0
Total liabilities and stockholders’ equity		$0

Prepare a statement of cash flows for the Year 1 accounting period. (Amounts to be deducted should be indicated with a minus sign.)

LIFE, INC.
Statement of Cash Flows
For the Year Ended December 31, Year 1
Cash flows from operating activities:



Net cash flow from operating activities		$0
Cash flows from investing activities
Cash flows from financing activities
Net change in cash		0

Ending cash balance		$0

Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2? (Do not round intermediate calculations.)

Rent expense to be recognized in Year 2

Expert Solution

(solution of requirement - A )

Assets + Shareholders Equity

EVENT	CASH	PREPAID RENT	= RETAINED EARNINGS
1. Performing counselling service	$ 29,200	-	$ 29,200
2. Prepaid rent	$ (20,400)	$ 20,400	-
3. Used rent	-	$(18,700)	$ (18,700)
TOTAL	$ 8,800	$ 1,700	$ 10,500

CALCULATION OF USED RENT = 1st Feburary to 31st December
CALCULATION OF USED RENT = 11 months
CALCULATION OF USED RENT = ( 20,400 /12 )* 11

= $ 18,700

(SOLUTION OF REQUIREMENT B.1)

LIFE Inc ( INCOME STATEMENT )

for the year ended 31 december

Service Revenue	$ 29,200
Rent Expenses	$ 18,700
Net Income	$ 10,500
Calculation ( 29,200 - 18,700 )=10,500

( SOLUTION OF REQUIREMENT B.2 )

LIFE Inc,

Balancesheet , as of december 31

ASSETS	AMOUNT
cash	$ 8,800
prepaid rent	$ 1,700
TOTAL ASSETS	$ 10,500

LIABILITIES
stockholder equity
retained earnings	$ 10,500
total stock holder equity	$ 10,500
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	$ 10,500

( SOLUTION OF REQUIREMENT B.3 )

Life Inc,

Statement of cash flow ( for the year ended dec,31)

Cash flows from operating activities	Amount
Net income	$ 10,500
Adjustement to reconcile net income
to net cash provided by operating activities ;
Increase in prepaid rent ( 0- 1,700)	$ (1,700)
Net cash provided by operating activities	$ 8,800
Cash flows from investing activities	-
Cash flows from financing activities	-
Net change in cash	$ 8,800
Cash balance as on 1st, january	-
Cash balance as on 31st, december	$ 8,800

cash balance as om 31st,december matches with cash balance reflecting in th balancesheet

( SOLUTION OF REQUIREMENT C. )

Rent expenses to be recognised in year .2 = $ 1,700
(We have made payment for rent for the month January also,

the prepaid rent consists of rent to be recognized for the month of January 2019)

So, we will recognize expense of $ 1,700, which is the balance that was remaining in

the prepaid rent account.

{ I AM SO GLAD YOU ASKED FOR HELP WHEN YOU NEEDED IT.}

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