Effect of adjusting entries on the accounting equation
Required
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’ |
||||||||
|
Event/ |
Cash |
+ |
Other |
= |
Liabilities |
+ |
Common |
+ |
Retained |
|
a |
6,000 |
+6,000 |
NA |
NA |
NA |
||||
|
Adj. |
NA |
4,500 |
NA |
NA |
24,500 |
||||
a. Paid $6,000 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.