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QS 3-5 Prepaid (deferred) expenses adjustments LO P1 In its first year of operations, Roma Company...

QS 3-5 Prepaid (deferred) expenses adjustments LO P1 In its first year of operations, Roma Company reports the following: Earned revenues of $45,000 ($37,000 cash received from customers). Incurred expenses of $25,500 ($20,250 cash paid toward them). Prepaid $6,750 cash for costs that will not be expensed until next year. Compute the company’s first-year net income under both the cash basis and the accrual basis of accounting.

a. prepaid insurance. The prepaid insurance account has 4700 debit balance to start the year. A review of insurance policies and payments shows that 900 of unexpired insurance remains at year end

b. prepaid insurance. The prepaid insurance account has 5890 debit balance at the start of the year. A review of insurance policies and payments shows 1040 of insurance has expired by year-end

c. Prepaid rent.On september 1 of the current year, the company prepaid 24000 for two years of rent for facilities being occupied that day. The company debited prepaid rent and credited cash for 24000

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