Question

for the first to questions, how do we get to the correct answer? for the last question, what is the correct answer, please please help me understand

Your Answer Correct Answer Your answer is correct. Oriole Company recorded journal entries for the declaration of $251500 of dividends, the $163500 increase in accounts receivable for services rendered, and the purchase of equipment for $106000. What net effect do these entries have on stockholders' equity? Decrease of $194000 Decrease of $357500. Decrease of $88000 Increase of $57500 Colution

Answer 1

Solution 1:

Effect on stockholders equity = services rendered - dividends = 163500 - 251500 = - $88,000

Hence "decrease of $88000" is correct.

Solution 2:

The commission of adjusting entry for depreciation expense will result in "increase in net income".

Increased net income will "increase the Owners' equity".

Also assets will be overstated due to omission of depreciation.

Hence both the owners' equity and assets will be overstated.

Hence, "overstatement of assets and overstatement of owners equity" is correct.

Solution 3:

Rent in advance for 1 year = $19,200

Since it was recorded with a credit to a nominal account that is "Rent Revenue".

Therefore December 31, 2020 adjusting entry will include reversal of rent revenue for 3 months as this is unearned for 3 months and will be debited to rent revenue and credited to Unearned rent revenue.

Unearned rent revenue for 3 months = $19,200*3/12 = $4,800

Hence adjusting entry is:

Debit Rent revenue......$4800

Credit Unearned Rent Revenue........$4800

Hence, last option is correct.