Effect of adjusting entries on the accounting equationRequired
Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is recorded as an example.
| Total Assets |
| Stockholders Equity | ||
Event/ Adjustment | Cash | Other + Assets | = Liabilities | Common + Stock | Retained +Earnings |
a | -3,000 | +3,000 | NA | NA | NA |
Adj. | NA | -2,250 | NA | NA | -2,250 |
a. Paid $3,000 cash in advance on April 1 for a one-year insurance policy.
b. Purchased $1,600 of supplies on account. At year’s end, $100 of supplies remained on hand.
c. Paid $6,000 cash in advance on March 1 for a one-year lease on office space.
d. Received a $ 15,000 cash advance for a contract to provide services in the future. The contract required a one-year commitment starting September 1.
e. Paid $12,000 cash in advance on October 1 for a one-year lease on office space.
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