The company pays $300,000 for an insurance policy that will cover the subsequent year. For each element of the fundamental accounting equation (A, L, E), indicate whether that element increases, decreases, or ultimately remains unchanged.
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The company pays $300,000 for an insurance policy that will cover the subsequent year.
For each element of the fundamental
decreases, or ultimately remains unchanged.
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- If the Prepaid Insurance account had a balance of $12,000, representing one years policy premium, which was paid on July 1, what entry would be needed to adjust the Prepaid Insurance account at the end of December, before preparing the financial statements?Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business sets up a line of credit with a supplier. The company purchases $10,000 worth of equipment on credit. Terms of purchase are 5/10, n/30. B. A customer purchases a watering hose for $25. The sales tax rate is 5%. C. Customers pay in advance for season tickets to a soccer game. There are fourteen customers, each paying $250 per season ticket. Each customer purchased two season tickets. D. A company issues 2,000 shares of its common stock with a price per share of $15.Assume that a lawyer bills her clients $15000 on June 30, for services rendered during June. The lawyer collects $8500 of the billings during July and the remainder in August. Under the accrual basis of accounting, when would the lawyer record the revenue for the fees? A. June, $15,000; July, $0; and August, $0 B. June, $0; July, $6,500; and August, $8,500 C. June, $8,500; July, $6,500; and August, $0 D. June, $0; July, $8,500; and August, $6,500
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- The company pays its landlord $750,000 for next year’s rent for the office building. For each element of the fundamental accounting equation (A, L, E), indicate whether that element increases, decreases, or ultimately remains unchanged.On April 1, 2022, Lansing Corporation opened for business and paid 600 in insurance to cover the next 12 months. The corporation is preparing financial statements for the period ending December 31, 2022. What amount of insurance expense should be recognized for Lasing's year of operations?On the first day of Month 1, a business had prepaid insurance of $10,000. On the first day of Month 8, it paid in full the annual insurance invoice of $36,000, to cover the following year. The amount charged in the income statement for insurance for the year is $ ........................................
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