Question

Calco, Inc., rents its store location. Rent is $6,000 per month, payable quarterly in advance. On July 1, a check for $18,000 was issued to the landlord for the July–September quarter. 1. Required information Requirement 1: a. Prepare the Horizontal model for each of the following transactions. To record the payment on July 1, assuming that all $18,000 is initially recorded as Rent Expense. To record the adjustment that would be appropriate at July 31 if your entry in a had been made. To record the initial payment on July 1 as Prepaid Rent. To record the adjustment that would be appropriate at July 31 if your entry in c had been made. To record the adjustment that would be appropriate at August 31 and September 30, regardless of how the initial payment on July 1 had been recorded (and assuming that the July 31 adjustment had been made). (Enter decreases to account balances with a minus sign.)

Answer 1

Answer:

Journal entries
Point No.	Particulars	Debit($)	Credit ($)
a.	Rent expense	18,000
	cash		18,000
	(To record the payment on July 1)
b	Prepaid Rent	12,000
	Rent expense		12,000
	(To record the adjustment that would be appropriate at July 31)
c	Prepaid Rent	18,000
	cash		18,000
	(To record the initial payment on July 1 as Prepaid Rent)
d	Rent expense	6,000
	Prepaid Rent		6,000
	(To record the adjustment that would be appropriate at July 31 if your entry in c had been made)
e	Rent expense	6,000
	Prepaid Rent		6,000
	(To record the adjustment that would be appropriate at August 31 and September 30)

The horizontal model presentation to Provided transactions as As follows or T-accounts.:
	Balance Sheet					Income Statement
S.No	Assets	=	Liabliltles	+	Stockhold er's Equity	Notes Payable	=	Revenues	-
										Expenses
a	Cash								-	Rent Expense
	-$18,000	+	-	+	-	-	+	-		-$18,000
b	Prepaid Rent		-			-				Rent Expense
	+$12,000	+		+	-		+	-	-	+$12,000
c	Prepaid Rent
	+$18,000								-
	Cash	+	-	+	-	-	+	-
	-$18,000
d	Prepaid Rent								-	Rent Expense
	-$6,000	+	-	+	-	-	+	-		-$6,000
e	Prepaid Rent		-		-	-		-		Rent Expense
	-$6,000	+		+			+		-	-$6,000