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Assessing Financial Statement Effects of Transactions and Adjustments
Selected accounts of Piotroski Properties, a real estate management firm, are shown below as of January 31, before any accounts have been adjusted.

Piotroski Properties prepares monthly financial statements. Using the following information, adjust the accounts as necessary on January 31 using the financial statements effect template.
(a) Prepaid insurance represents a three-year premium paid on January 1.
(b) Supplies of $950 were still available on January 31.
(c) Office equipment is expected to last eight years (or 96 months).
(d) Earlier this month, on January 1, Piotroski collected $5,250 for six months' rent in advance from a tenant renting space for $875 per month.
(e) Salaries of $490 have been earned by employees but yet not recorded as of January 31.

Balance Sheet

Income Statement

Debits Credits Prepaid Insurance $6,660 Supplies 1,930 Office Equipment 5,952 Unearned Rent Revenue $5,250 Salaries Expense 3,100 Rent Revenue 15,000

Explanation / Answer

Part A)

Notes:

1) Rent for 1 month ($185) will get adjusted at 31st January.

2) The value of supplies used ($980) during the month will require adjustment on 31st January.

3) Adjustment of depreciation ($62) for the month of January will be made on 31st January.

4) The revenue for 1 month ($875) will get transferred from unearned revenue to service/rental revenue on 31st January requiring an adjustment.

5) The adjustment for salaries accrued ($490) but not paid will be made on 31st January.

_________

Part B)

Balance Sheet Transaction Cash Asset + Non Cash Assets = Liabilities + Contributed Capital + Earned Capital a) 0 -185 (6,660/3*1/12) 0 0 -185 b) 0 -980 (1,930 - 950) 0 0 -980 c) 0 -62 (5,952/96) 0 0 -62 d) 0 0 -875 0 875 e) 0 0 490 0 -490

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