Answer:
a.
Accounting Equation
Event Assets = Equity + Liability
1. Services +$20,400 +$20,400
2. Rent Payment -$13,800
+$13,800
3. Adjustment -$12,650 -$12,650
b.
Income Statement
Revenue $20,400
Expenses $12,650
Net Income $7,750
Balance Sheet
Assets
Prepaid Rent $1,150
Cash $6,600
Total Assets $7,750
Equity and Liability
Equity (Retained Earning) $7,750
Liabilities $0
Total Assets $7,750
Statement of cash flow
Cash flow from Operating activities
Net profit $7,750
Increase in receivable ($1,150)
Net Operating Cash flow $6,600
Net Investing Cash flow $0,000
Net Financing Cash flow $0,000
Total Net cash flow $6,600
Opening cash balance $0,000
Closing cash balance $6,600
c.
Year 1 Rent Expense = $13,800 x ( 11 / 12 ) = 12,650
Rent Expense Expense to recognized next year = Prepaid Rent = $1,150
Explanation:
* Year end is December 31, Year 1
As 11 months passed from February 1, Year 1 and expense of these months has been accrued, so only one months rent remains prepaid.
Prepaid rent = $13,800 - $12650 = $1,150
Cash = $20,400 - 13,800 = $6,600
