Homework Answers
Answer:
Equation for Adjusting entry to property report expenses on December 31,2009:
| Stockholders' Equity | ||||||||||
| Assets | = | Liabilities | + | Contributed Capital | + | Retained Earnings | ||||
| $ | Account | $ | Account | $ | Account | $ | Account | |||
| ($900) | Prepaid insurance | = | + | + | ($900) | Insurance Expense | ||||
Explanation:
Given that, $3,600 paid for insurance on April 1,2009 for 3 years (or) 36 months
Rent expense for the year 2009 (April.1,2009 to Dec 31,2009) = $3,600 x (9 months/36 months)
Rent expense = 3,600 x 9/36
Rent expense = $900
.
So that, prepaid insurance balance decreased by $900 and Retained earnings balance is also decreased by $900 due to insurance expense.
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