Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 12

Alternative adjustments-rent Calco, Inc., rents its store location. Rent is $6,000 per month, payable quarterly in advance. On July 1, a check for $18,000 was issued to the landlord for the July-September quarter.
Required:
Use the horizontal model to show the effects on the financial statements of Calco, Inc.:
a. To record the payment on July 1, assuming that all $18,000 is initially recorded as Rent Expense.
b. To record the adjustment that would be appropriate at July 31 if your entry in a had been made.
c. To record the payment on July 1, assuming instead that all $18,000 is initially recorded as Prepaid Rent.
d. To record the adjustment that would be appropriate at July 31 if your entry in c had been made.
e. To record the adjustment that would be appropriate at August 31 and September 30, regardless of how the payment on July 1 had been initially recorded (and assuming that the July 31 adjustment had been made).
f. If you were supervising the bookkeeper, how would you suggest that the July 1 payment be recorded? Explain your answer.
(Note: As an alternative to using the horizontal model, write the journal entries to show each of these transactions and adjustments.)