Question

Life, Inc. experienced the following events in Year 1, its first year of operation: Performed counseling services for $31,600 cash. On February 1, Year 1, paid $22,200 cash to rent office space for the coming year. Adjusted the accounts to reflect the amount of rent used during the year. Required Based on this information alone: a. Record the events in general ledger accounts under an accounting equation. b. Prepare an income statement, balance sheet, and statement of cash flows for the Year 1 accounting period. c. Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2

Answer 1

Answer:

The accounting equation states that "Assets=Capital Liabilities"

As a result, the  equation here gives $11250 on both sides of the question.

The profit or loss statement gives net income of $11250 as well ,while the balance sheet has $11250 total as assets, the same as equity plus liabilities.

Finally,the statement of cash flow showed increase in cash and cash equivalent in the year as $9400.

The rent expense applicable to year 2 is the balance of prepaid rent which currently stood at $1850

Explanation:

Please find attached spreadsheet showing details regarding all the financial statements prepared in respect of Life Inc.

Download xlsx