Question

Life, Inc., experienced the following events in 2018, its first year of operation: 1. Performed counseling services for $19,600 cash. 2. On February 1, 2018, paid $13,200 cash to rent office space for the coming year. 3. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: a. Record the events under an accounting equation. b. Prepare an income statement, balance sheet, and statement of cash flows for the 2018 accounting period. c. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2019? Complete this question by entering your answers in the tabs below. Req A Req B1 Inc Stmt Req B2 Bal Sheet Req B3 CF Stmt Reg C Record the events under an accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.) LIFE, INC. Effect of Events on the Accounting Equation - Stockholders' Assets Equity Retained Event Rent Earnings 1. Performed counseling services 2. Prepaid rent 3. Used rent Totals Cash Prepaid

Answer 1

Used rent = $13,200/12*11 = $12,100

Prepaid rent = $13,200 - 12,100 = $1,100

A.

LIFE INC. Effects of Events on The Accounting Equation
		Assets		=	Stockholders Equity
	Event	Cash	Prepaid rent
1.	Performed counseling services	$19,600			$19,600
2.	Prepaid rent	-1,100	1,100
3.	Used rent	-12,100			-12,100
	Totals	$6,400	$1,100	=	$7,500

B.

LIFE INC. Income Statement For The Year Ended December 31, 2018
Service revenue	$19,600
Less: Expenses
Rent expense	-12,100
Net income	$7,500

LIFE INC. Balance Sheet As Of December 31, 2018
Assets:
Current assets
Cash	$6,400
Prepaid rent	1,100
Total assets		$7,500
Liabilities
Stockholders Equity
Common stock	0
Retained earnings	7,500
Total stockholders equity		7,500
Total liabilities and stockholders equity		$7,500

LIFE INC. Statement of Cash Flows For The Year Ended December 31, 2018
Cash flow from operating activities:
Cash receipts from customers	$19,600
Cash paid for rent	-13,200
	6,400
Net cash flow from operating activities		$6,400
Cash flow from investing activities		$0
Cash flow from financing activities		$0
Net change in cash		6,400
Beginning cash balance		0
Ending cash balance		$6,400

C.

Amount of rent expense recognized in 2019 = $1,100