A company prepares monthly financial statements. Using the following information

Question

A company prepares monthly financial statements. Using the following information, adjust the accounts as necessary on January 31, using the financial statement effects template.(a) Prepaid insurance represents a three-year premium paid on January 1.(b) Supplies of $850 were still available on January 31.(c) Office equipment is expected to last eight years (or 96 months).(do) The unearned rent revenue represents six months of rent received in advance on January 1.(e) Salaries of $490 have been earned by employees but yet not recorded as of January 31.

Explanation / Answer

A) Prepaid insurance amount for one month will be charged to insurance expense amount

Calculated as Total prepaid insurance / 36 months * 1 month

B) Supplies of 850 will be subtracted from supplies expense account and will be shown as asset

C) Depreciation will be charged on equipment and the same will be calculated as

Total equipment value / 96 months * 1 month

D) month renbt will be accounted as earned rent and will be sutracted from unearned revenue account and the same will be calculated as Total unearned rent / 6 months * 1 month

E) Salary of 490 will be charged to salary expense account and the same will be shown as liability

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