Recording prepaid items and identifying their effect on financial  statementsCalifornia Mi...

Recording prepaid items and identifying their effect on financial  statements

California Mining began operations by issuing common stock for $100,000, The company paid $90,000 cash in advance for a one-year contract to lease machinery for the business. The lease agreement was signed on March 1, 2011, and was effective immediately. California Mining received $115,000 of cash revenue in 2011.

Required

a. Record the March 1 cash payment in general journal format.

b. Record in general journal format the adjustment required as of December 31. 2011.

c. Record all 2011 events in a horizontal statements model like the following one:

d. What amount of net income would California Mining report on the 2011 income statement? What is the amount of net cash flow from operating activities for 2011?

e. Determine the amount of prepaid rent California Mining would report on the December 31, 2011, balance sheet.