Therapy Inc. experienced the following events in 2013, its first year of operati

Question

                    Therapy Inc. experienced the following events in 2013, its first year of operation                 

                    1. Performed counseling services for $18,000 cash                 

                    2. On February 1`, 2013 paid $12,000 cash to rent office space for the coming year                 

                    3. Adjusted the accounts to reflect the amount of rent used during the year.                 

                    Based on this information alone                 

                    a. Record the events under an accounting equation.                 

                    b.Prepare an income statement, balance sheet, and statement of cash flows for the 2013 accounting period.                 

                    c. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2014?                 

Explanation / Answer

Income Statement

Statement of Cash Flows

Balance Sheet

1. Prepaid rent

$18,000

2. Cash paid for rent

$(12,000)

3. Rent expense

$6,000

Income Statement

Statement of Cash Flows

Balance Sheet

1. Prepaid rent

$18,000

2. Cash paid for rent

$(12,000)

3. Rent expense

$6,000

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