A transaction has been recorded in the T-accounts of Powell Corporation as follows:Prepaid RentRent Expense1,0001,000Which of the following reflects how this event affects the company's financial statements?A.B.C.D.DebitAssets =++CreditMultiple ChoiceLiabilities ++N/AN/ABalance SheetOption COption AOption BDebitOption DStockholdersEquityN/A+N/ACreditRevenueN/AN/A+N/AIncome StatementExpenseN/A+N/A+Net IncomeN/AStatement of Cash Flows+FAN/A+OA-OA

The prepaid expenses are the expenses that are paid in advance. The adjustment entries are prepared to adjust the revenue and expenses of the current period. As per given transaction, the rent expense has been debited and prepaid rent has been credited. The rent expense (expenses) is increased and prepaid rent (asset) is decreased. With increase in rent expense, the net income and further, shareholder's equity will would be decreased. There is no cash transaction and hence, cash flow statement would not be affected with the transaction. To conclude, the assets and shareholders equity are decreased. The expenses are increased and net income is decreased. Hence, option B. Represents the correct effect on accounting equation for the given transaction.

Business

Accounting

Rent Expense Debit 1,000 1,000 Which of the following reflects how this event affects the company's financial statements? A. B. C. D. Credit Balance Sheet Assets = Liabilities + Multiple Choice Option C Option A Option B Option D Prepaid Rent Credit N/A N/A Debit Stockholders' Equity N/A N/A Revenue N/A N/A N/A Income Statement Expense = Net Income N/A N/A N/A Statement of Cash Flows +FA N/A +0A -OA

Rent Expense Debit 1,000 1,000 Which of the following reflects how this event affects the company's financial statements? A. B. C. D. Credit Balance Sheet Assets = Liabilities + Multiple Choice Option C Option A Option B Option D Prepaid Rent Credit N/A N/A Debit Stockholders' Equity N/A N/A Revenue N/A N/A N/A Income Statement Expense = Net Income N/A N/A N/A Statement of Cash Flows +FA N/A +0A -OA

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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Question

100%

A transaction has been recorded in the T-accounts of Powell Corporation as follows:
Prepaid Rent
Rent Expense
1,000
1,000
Which of the following reflects how this event affects the company's financial statements?
A.
B.
C.
D.
Debit
Assets =
+
+
Credit
Multiple Choice
Liabilities +
+
N/A
N/A
Balance Sheet
Option C
Option A
Option B
Debit
Option D
Stockholders
Equity
N/A
+
N/A
Credit
Revenue
N/A
N/A
+
N/A
Income Statement
Expense
N/A
+
N/A
+
Net Income
N/A
Statement of Cash Flows
+FA
N/A
+OA
-OA

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