Book 1 - Chapter 24

24-1, continued

Santa Monica Company purchases $10,000 of equipment by paying $1,000 cash and signing
a $9,000 note payable.

A = L + OE

Cash
	1,000

Equipment
10,000

Notes Payable
	9,000

Fairfield Partnership prepays three months’ office rent for $12,000.

A = L + OE

Cash
	12,000

Prepaid Rent
12,000

Sonoma Company receives a three-month advance payment from a customer in the amount
of $5,000.

A = L + OE

Cash
5,000

Unearned Revenue
	5,000

Salinas Enterprises pays a $400 account payable.

A = L + OE

Cash
	400

Accounts Payable
400

Fairfield Company, (f) above, uses up one month of the prepaid office rent.

A = L + OE

Prepaid Rent
	4,000

Rent Expense
4,000

Note: An increase in an expense decreases the owner’s equity, and the equation is still in balance.

Learning Goal 24, continued

SOLUTIONS

Section V · Using a Basic Accounting System

Home

Home || Book Publications || Professor’s Office || Student Info & Resources || Useful Links

Worthy & James Publishing is a provider of basic accounting books covering fundamental accounting principles, business accounting, and business math. Topics in financial accounting and business accounting covered include the balance sheet, the income statement, financial ratios, and bank reconciliation.