Question

A. In February, Dicey Discount signs and pays for a contract with a lawn service company to provide lawn services for the twelve-month period beginning March 1. The cost of the contract is $6,000. Show the effect on Dicey Discount's accounting equation, including account titles: Assets Liabilities I Owners' Equity February March April B. In January, Dicey Discount signs a contract with a local company to clear its parking lot of snow whenever it snows. Because of uncertainty with the weather, the contract is for the snow removal company to bill Dicey Discount each month based on the actual time spent removing snow. There were no services performed in January. In February, the snow removal company billed Dicey Discount $800 for snow removal services performed in February. Dicey Discount paid the invoice in March. Show the effect on Dicey Discount's accounting equation, including account titles: Assets Liabilities Owners' Equity January February March

Answer 1

A.

	Assets	Liabilities	Owner's equity
February	Cash = - $6,000, Prepaid expense = $6,000
March	Prepaid expense = - $500		Maintenance Expense = - $500
April	Prepaid expense = - $500		Maintenance Expense = - $500

Maintenance Expense paid for 12 months period = $6,000

Monthly Maintenance Expense = 6,000/12

= $500

B.

	Assets	Liabilities	Owner's equity
January
February		Accounts payable = $800	Expense = - $800
March	Cash = - $800	Accounts payable = - $800

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