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2. Prepare the journal entry to record the payment of rent on September 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Journal Income Statement Date Sept. 1 Description Prepaid Rent Cash ▾ Date Journal Debit Description Sept. 30 Rent Expense 13,140 Credit Debit 2,190 13,140 Credit Assets 2,190 3. Prepare the adjusting entry on September 30. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Balance Sheet Income Statement Balance Sheet Assets Liabilities + Liabilities Stockholders Equity Revenues Stockholders Equity Expenses Revenues Expenses Prepaid Rent 4. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? Overstated By what amount? S 6,570 Net Income Net Income

2. Prepare the journal entry to record the payment of rent on September 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Journal Income Statement Date Sept. 1 Description Prepaid Rent Cash ▾ Date Journal Debit Description Sept. 30 Rent Expense 13,140 Credit Debit 2,190 13,140 Credit Assets 2,190 3. Prepare the adjusting entry on September 30. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Balance Sheet Income Statement Balance Sheet Assets Liabilities + Liabilities Stockholders Equity Revenues Stockholders Equity Expenses Revenues Expenses Prepaid Rent 4. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? Overstated By what amount? S 6,570 Net Income Net Income

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter4: Income Measurement And Accrual Accounting
Section: Chapter Questions
Problem 4.6E: Prepaid Rent—Quarterly Adjustments On September 1, Northhampton Industries signed a six-month...
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Prepaid Rent-Quarterly Adjustments On September 1, Northhampton Industries signed a six-month lease for office space, which is effective September 1. Northhampton agreed to prepay the rent and mailed a check for $13,140 to the landlord on September 1. Assume that Northhampton prepares adjusting entries only four times a year: on March 31, June 30, September 30, and December 31. Required: 1. Compute the rental cost for each full month. s 2,190 per month 2. Prepare the journal entry to record the payment of rent on September 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Journal Balance Sheet Income Statement Date Description Sept. 1 Prepaid Rent Cash ▾ Date Journal Description Sept. 30 Rent Expense Debit 13,140 Credit Debit 2,190 13,140 Credit Assets 3. Prepare the adjusting entry on September 30. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Balance Sheet 2,190 Assets Liabilities = + Liabilities Stockholders' Equity Revenues Stockholders' Equity Expenses Revenues Income Statement Expenses Prepaid Rent 4. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? Overstated ▾ By what amount? S 6,570 = = Net Income Net Income
Transcribed Image Text:Prepaid Rent-Quarterly Adjustments On September 1, Northhampton Industries signed a six-month lease for office space, which is effective September 1. Northhampton agreed to prepay the rent and mailed a check for $13,140 to the landlord on September 1. Assume that Northhampton prepares adjusting entries only four times a year: on March 31, June 30, September 30, and December 31. Required: 1. Compute the rental cost for each full month. s 2,190 per month 2. Prepare the journal entry to record the payment of rent on September 1. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Journal Balance Sheet Income Statement Date Description Sept. 1 Prepaid Rent Cash ▾ Date Journal Description Sept. 30 Rent Expense Debit 13,140 Credit Debit 2,190 13,140 Credit Assets 3. Prepare the adjusting entry on September 30. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement. Balance Sheet 2,190 Assets Liabilities = + Liabilities Stockholders' Equity Revenues Stockholders' Equity Expenses Revenues Income Statement Expenses Prepaid Rent 4. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? Overstated ▾ By what amount? S 6,570 = = Net Income Net Income
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