On May 1, 2012, Virginia Corporation paid $18,000 cash in advance for a one-year lease on an

Question:

On May 1, 2012, Virginia Corporation paid $18,000 cash in advance for a one-year lease on an office building. Assume that Virginia records the prepaid rent and that the books are closed on December 31.

Required

a. Show the payment for the one-year lease and the related adjusting entry to rent expense in the accounting equation.

b. Assume that Virginia Corporation failed to record the adjusting entry to reflect using the office building. How would the error affect the company’s 2012 income statement and balance sheet?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...