Question

For each of the following transactions for the Sky Blue Corporation, give the accounting equation effects of the adjustments required at the end of the month on October 31. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign)

a. Collected $2,220 rent for the period October 1 to December 31, which was credited to Unearned Revenue on October 1.
b. Paid $1,056 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount.
c. Used a machine purchased on October 1 for $40,800. The company estimates annual depreciation of $4,080.

Answer 1

The response the given points can be defined as follows:

Step-by-step explanation:

`Transaction \ \ \ \ \ \ \ \ \ \ \ \ Assets \ \ = \ \ Liabilities \ \ + \ \ \ \ Stockholder's \ \ Equity`

For point a. -740 + 740

For point b. -44 + -44

For point c. 340 + -340

For point a:

The money received for 3 months is again transferred to rent for one month
`( (\$2200)/(3))` . Account for sales.

For point b:

Payment of prepaid insurance for 2 years (24 months), hence one month's costs for insurance
`( (\$1056)/(24))` the cost of the insurance shall be shifted.

For point c:

One month
`( (\$4080)/(12))`depreciation expenses are moved to Depreciation Costs and depreciation accrued.