The Chase Consulting Group was organized on July 1, 2010 when the two principal owners each contributed $50,000 and received shares of stock in exchange. The following events occurred during Chase Consulting Group's first year of operations.
1. On July 1, acquired a building by paying $50,000 in cash and borrowing $250,000 from the ABC Bank.
Information regarding the building: The building has a useful life of 30 years and no salvage value. Chase Consulting uses straight line depreciation.
Information regarding the note payable: The note payable will be due in full in five years. Interest is payable annually. The interest rate on the note is 5%.
2. On July 1, paid cash in the amount of $1,200 for a one-year property insurance policy.
3. On August 1, purchased two computers for $4,000 cash each. The computers have a useful life of 5 years and a $100 salvage value. The computers will be depreciated using the straight line method.
4. On October 1, receives $120,000 in cash for services to be provided evenly during the next six months.
Required:
A. Determine the effect on the accounting equation of the necessary adjustments at December 31 for each of the following:
a. Depreciation on the building