Each of the following events describes acquiring an asset that requires a year-end adjusting entry.
1. Paid $27,000 cash on January 1 to purchase computer equipment to be used for administrative purposes. The equipment had an estimated expected useful life of five years and a $2,000 salvage value.
2. Paid $27,000 cash on January 1 to purchase manufacturing equipment. The equipment had an estimated expected useful life of five years and a $2,000 salvage value.
3. Paid $12,000 cash in advance on May 1 for a one-year rental contract on administrative offices.
4. Paid $12,000 cash in advance on May 1 for a one-year rental contract on manufacturing facilities.
5. Paid $2,000 cash to purchase supplies to be used by the marketing department. At the end of the year, $400 of supplies was still on hand.
6. Paid $2,000 cash to purchase supplies to be used in the manufacturing process. At the end of the year, $400 of supplies was still on hand.

Required
Explain how the adjusting entry affects the amount of net income shown on the year-end financial statements. Assume a December 31 annual closing date. The first event has been recorded as an example. Assume that any products that have been made have not beensold.

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Net Income Amount of Change Event No. 1. Adjusting entry $(5,000)