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The adjusting entry would be rent expense 1,000 / prepaid rent 1,000.
<h3>What is adjusting entry? </h3>
- In accounting/accountancy, adjusting entries are journal entries usually made at the top of an accounting period to expenditure and allocate income to the period in which they actually occurred.
- The revenue recognition principle is that the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting.
- It is also known as Balance Day adjustments because they are made on balance day.
- Based on the matching principle of accrual accounting, revenues and associated costs are recognized within the same accounting period. However the particular cash may be received or paid at a different time.
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Answer:
The Net cash is 436.000
Explanation:
To get net cash flow using the indirect method we must make adjustments to the net income.
It depends on the account if it is added or subtracted to net income
In this case,
Net income 400.000
Adjustment to reconcile the net income to cash
- Accounts receivable increase (40.000)
+ Depreciation expense 80.000
+ Prepaid expenses decrease 12.000
- Gain on sale of machinery (20.000)
+ Accounts payable increase 6.000
- Wages payable decrease (2.000)
Net cash 436.000
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