Problem

Effect of adjusting entries on the accounting equationRequiredEach of the following indepe...

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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