To take advantage of a zero percent rent increase for the coming year, a company paid,...
To take advantage of a zero percent rent increase for the coming year, a company paid, at year-end, $300,000 rent for the first three months of the next year. What would the effect of this transaction on the company’s year-end accounting equation of this year?
| No net effect on Assets; $300,000 decrease in Liabilities; $300,000 increase in Stockholders’ Equity |
| $300,000 increase in Assets; $300,000 increase in Liabilities; No net effect on Stockholders’ Equity |
| $300,000 increase in Assets; No net effect on Liabilities; $300,000 increase in Stockholders’ Equity |
| No net effect on Assets; No net effect on Liabilities; and No net effect on Stockholders’ Equity |
| None of these statements is correct. |
Homework Answers
Year end accounting equation :
| Assets | = | Liabilities | + | Stockholder's equity |
| Cash -300000 | ||||
| Prepaid rent 300000 |
So answer is d) No net effect on Assets; No net effect on Liabilities; and No net effect on Stockholders’ Equity
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