Question

! Required information For each of the following transactions for the Sky Blue Corporation: a. Collected $2,700 rent for the period October 1 to December 31, which was credited to Deferred Revenue on October 1. b. Paid $1,440 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount. c. Used a machine purchased on October 1 for $49,200. The company estimates annual depreciation of $4,920. Give the accounting equation effects of the adjustments required at the end of the month on October 31. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.) Transaction Assets Liabilities Stockholders' Equity a. b. C.

Answer 1

(a)

Rent revenue for 3 months = $2,700

Rent revenue for 1 month = 2,700 x 1/3

= $900

(b)

Insurance expense for 2 years = $1,440

Insurance expense for 1 year = 1,440 x 1/24

= $60

(c)

Annual depreciation expense = $4,920

Depreciation expense for 1 month = 4,920 x 1/12

= $410

Transaction	Assets		=	Liabilities		+	Stockholders Equity
a.				Deferred revenue	-900		Rent revenue	900
b.	Prepaid insurance	-60					Insurance expense	-60
c.	Accumulated depreciation	-410					Depreciation expense	-410

Kindly comment if you need further assistance. Thanks‼!