Question: Determining Effects of Adjustments
For each of the following transactions for Sky Blue Company owned by sole proprietor Anna Cerveny, give the effects amounts and direction of effect (+ for increase or - for decrease) of the adjustments required at the end of the month on December 31, 2010. Use the following form. If an element is not affected, write NE for no effect.
a. Collected $1,200 rent for the period December 1, 2010, to February 28, 2011, that was credited to Unearned Rent Revenue on December 1, 2010.
b. Paid $2,400 for a two-year insurance premium on December 1, 2010; debited Prepaid Insurance for that amount.
c. Used a machine purchased on December 1, 2010, for $48,000. The company estimates annual depreciation of $4,800.
