Answered: Q-1 If Asset Method or Real Approach is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On September 1, 20A, Maria Theresa C Apostol, owner of Cateel Fitness Centre paid an advance rental on a space of the building it occupies in the amount of P84,000. This covers the period from September 1, 20A to September 1, 20B and the accounting period ends on December 31, 20A. Q-1 If Asset Method or Real Approach is used in recording the prepayment, what is your journal entry on September 1, 20A? Q-2. If Expense Method or Nominal Approach is used in recording the prepayment, what is your journal entry on September 1, 20A? Q-3. How much of the P84,000 advanced rental payment will expire or will be expensed at the end of each month? Q4. How many months will cover the expense portion? _____________ from ______________ to ________________. Q5. How many months will cover the asset portion? _____________ from ______________ to ________________. Q6. How much of the P84,000 prepayment will be considered as Expense? _____________________ as Asset? ___________________ Q7. If Asset Method or Real Approach is used in recording the prepayment, what is your adjusting journal entry on December 31, 20A? Q8 If Expense Method or Nominal Approach is used in recording the prepayment, what is your adjusting journal entry on December 31, 20A? Q-9 Regardless of what method is used in recording the prepayment, How much amount of Prepaid Rent account that will be shown in the Balance Sheet as of December 31, 20A? How much amount of Rent Expense account that will be shown in the Income Statement for the period ended?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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