Question

Exercise 3-49 (Algorithmic) Prepayments, Collections in Advance Greensboro Properties Inc. owns a building in which it leases office space to small businesses and professionals. During 2019, Greensboro Properties engaged in the following transactions: a. On March 1, Greensboro Properties paid $9,240 in advance to Patterson Insurance Company for 1 year of insurance beginning March 1, 2019. The full amount of the prepayment was debited to prepaid insurance, b. On May 1, Greensboro Properties received $32,280 for 1 year's rent from Angela Cottrell, a lawyer and new tenant. Greensboro Properties credited unearned rent revenue for the full amount collected from Cottrell. c. On July 31, Greensboro Properties received $243,000 for 6 months' rent on an office building that is occupied by Newnan and Calhoun, a regional accounting firm. The rental period begins on August 1, 2019. The full amount received was credited to unearned rent revenue. d. On November 1, Greensboro Properties paid $8,100 to Pinkerton Security for 3 months' security services beginning on that date. The entire amount was debited to prepaid security services. Required: < 1. Prepare the journal entry to record the receipt or payment of cash for each of the transactions March 1 (Record prepayment for insurance) May 1 (Record receipt of cash for rent)

please do question 3

Answer 1

a) Insurance expense for 10 months from March to December = 9240 x 10/12 = $7,700 b) Rent revenue received from Cottrell for 8 months from May to December = 32280 x 8/12 = $21,520 c) Rent revenue from Newnan for 5 months = 243,000 x 5/6 = $202,500 d) Security expense for 2 months = 8100 x 2/3 = $5,400

Revenue understated = 21,520 + 202,500 = $224,020 Expenses Understated = 7,700 + 5,400 = $13,100 Net income Understated = 224,020 - 13,100 = $210,920 Assets Overstated = 7,700 + 5,400 = $13,100 Liabilities overstated = 21,520 + 202,500 = $224,020 Retained earnings understated = 224,020 - 13,100 = $210,920

Revenue	Understated	$224,020
Expenses	Understated	$13,100
Net income	Understated	$210,920
Assets	Overstated	$13,100
Liabilities	Overstated	$224,020
Retained earnings	Understated	$210,920