Question

Enter Shift Part A (20 marks) he balance in the Prepaid Rent account before adjustment at the end of the year is $12,000 and represents three months rent starting on November 1. The adjusting entry required on December 31, assuming adjusting entries have not previously been made, is Debit Prepaid Rent, S4,000; credit Rent Expense $4,000. b) Debit Prepaid Rent, $8,000; credit Rent Expense, $8,000. Debit Rent Expense, S12,000; credit Prepaid Rent, $12,000. Debit Rent Expense, $8,000; credit Prepaid Rent, $8,000. 2. If XYZ Corp. fails to adjust the Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements? ) This will have no effect on the financial statements. bExpenses will be overstated and net income and shareholders' equity will be understated. Assets will be overstated and net income and shareholders' equity will be understated. d)Assets will be overstated and net income and shareholders' equity will be overstated. 3. On September 1, Monmouth Microwaves Ltd. signed a 9%, five-month bank loan payable for $9,000. The amount of interest to be accrued at December 31, assuming adjusting entries have not been previously made, is a $9,810 b) $810 c) $337 $270 4. Marvel Inc. has $180,000 in current assets and $150,000 in current liabilities. When the company pays $35,000 owed to employees (salaries payable), what effect does this have on their current ratio? a) The ratio increases. b) The ratio decreases. The ratio stays the same. Cannot be determined. - -

Hi there, can you please answer questions 1-4. they are all very short :) Also, the circled answer may or may not be correct and please disregard the blue scribble marks

Answer 1

1)	Rent per month =$12000/3
	=$4000
	Number months covered in the current period = November and December i.e.2 months
	Therefore entry should be recorded
	Date	Account Title	Debit	Credit
		Rent Expenses	$        8,000
		Prepaid Rent		$        8,000
		Correct Option: D
2)	Correct Option: D
	Assets will be overstated and net income and shareholders equity will be overstated.
	Because the expenses are not recorded and unnecessarily asset is recorded.
3)	Number of months covered during the reporting period
	September to December = 4 months
	Interest accrued = 9000*9%*4/12
		=$270
	Correct Option: D
4)	Correct Option: A
	The ratio increases.
	Because current liabilities are denominator in the current ratio.
	Decrease the value of denominator would increase the value of the ratio.