On June 20, 2021, Amy Smith, owner of Amy’s Floral Shop, Inc., signed a contract to rent a retail store. As part of the contract, Amy paid four months of rent in advance. The rental rate is $3,000 per month, thus she paid $12,000 cash in advance when she signed the contract on June 20. Amy will move into the retail store on July 1, 2021, which is the start of her rental period. The company has the accounting policy that all prepaid assets are initially recorded in asset accounts. The following is a partial list of the accounts in Amy’s General Ledger. These are the only accounts you need for this problem. Cash Prepaid Rent (asset account) Rent Expense Requirement 1 Prepare the General Journal entry to record the $12,000 payment made when the rental contract was signed on June 20, 2021. Requirement 2 Fill-in the amounts on the Prepaid Rent timeline. The boxes above the timeline show the amount of Prepaid Rent still remaining at various dates during the four month period. The boxes below the timeline show the amount of Prepaid Rent that expires (is used-up) during each of the four months. Hint: The amount that expires will be the same each month. Requirement 3 Prepare a “T” account analysis to determine the required July 31 adjustment to the Prepaid Rent account. Requirement 4 Prepare the July 31 General Journal adjusting entry for Prepaid Rent. Requirement 5 Assuming that all monthly General Journal adjusting entries were correctly made: What would be the amount of Prepaid Rent shown on Amy’s Floral Shop, Inc.’s Balance Sheet as of August 31, 2021? What would be the amount of Rent Expense on the Income Statement for the period August 1 to August 31, 2021?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
7-4
On June 20, 2021, Amy Smith, owner of Amy’s Floral Shop, Inc., signed a contract to rent a retail
store. As part of the contract, Amy paid four months of rent in advance. The rental rate is $3,000
per month, thus she paid $12,000 cash in advance when she signed the contract on June 20. Amy
will move into the retail store on July 1, 2021, which is the start of her rental period.
The company has the accounting policy that all prepaid assets are initially recorded in asset
accounts.
The following is a partial list of the accounts in Amy’s General Ledger. These are the only
accounts you need for this problem.
Cash
Prepaid Rent (asset account)
Rent Expense
Requirement 1
Prepare the General
contract was signed on June 20, 2021.
Requirement 2
Fill-in the amounts on the Prepaid Rent timeline. The boxes above the timeline show the
amount of Prepaid Rent still remaining at various dates during the four month period. The
boxes below the timeline show the amount of Prepaid Rent that expires (is used-up) during
each of the four months. Hint: The amount that expires will be the same each month.
Requirement 3
Prepare a “T” account analysis to determine the required July 31 adjustment to the Prepaid
Rent account.
Requirement 4
Prepare the July 31 General Journal adjusting entry for Prepaid Rent.
Requirement 5
Assuming that all monthly General Journal
What would be the amount of Prepaid Rent shown on Amy’s Floral Shop, Inc.’s Balance
Sheet as of August 31, 2021?
What would be the amount of Rent Expense on the Income Statement for the period
August 1 to August 31, 2021?
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
