Recording prepaid items and identifying their effect on financial statementsThe Far East C...

Recording prepaid items and identifying their effect on financial statements

The Far East Company began operations when it issued common stock for $50,000 cash. It paid $48,000 cash in advance for a one-year contract to lease delivery equipment for the business. It signed the lease agreement on March 1, 2011, which was effective immediately. Far East received $60,000 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 events in a horizontal statements model like the following one:

d. What amount of net income will Far East 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 Far East would report on the December 31, 2011, balance sheet.