Final answer:
The $6,000 payment for rent by Jethro Inc. resulted in a decrease in cash and an increase in prepaid rent, an asset. The transaction is debited to Prepaid Rent and credited to Cash. Using a separate example, if sales revenue was $1 million, with $950,000 in combined expenses, the accounting profit would be $50,000.
Step-by-step explanation:
When Jethro Inc. paid $6,000 for the next 6 months of rent on October 1, 2017, the accounting entry affected the accounting equation by reducing cash and increasing prepaid rent, which is an asset. This transaction is recorded as a debit to the Prepaid Rent account and a credit to the Cash account. Prepaid rent is an asset because it represents future economic benefits that the company will receive, in this case the use of the rental property for the upcoming six months.
In relation to the example provided for reference, if a firm had sales revenue of $1 million last year and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be the total revenue minus the total expenses. The expenses add up to $950,000, which means the accounting profit is $1 million - $950,000 = $50,000.