Question

X Company prepares monthly financial statements. Its accountant recorded the following October 1 transactions and the appropriate adjusting entries on October 31:

1. On October 1, the company paid rent for the final three months of the year. Rent was $1,575 per month.
2. On October 1, the company purchased equipment that cost $20,000, borrowing the full amount from a bank. The equipment has a life of four years and a salvage value at that time of $2,000. The company will repay the loan on December 31, along with interest at $158 per month.

8. What was the effect of the accountant's entries on total assets?

Tries 0/3

9. What was the effect of the accountant's entries on Net Income in October?

Tries 0/3

Answer 1

Answer
8
Equipment cost	$             20,000
Prepaid Rent expired	$             -1,575
Depreciation expense	$                -375	(20000-2000)/4*1/12
Effect on Total assets	$             18,050
9
Rent expense	$             -1,575
Depreciation expense	$                -375	(20000-2000)/4*1/12
Interest expense	$                -158
Effect on net income	$             -2,108

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