Connect Part provides the balances from Cabot Company’s balance sheet as of December 31 of year one. These amounts are the beginning balances for year 2. Begin by including beginning balances in the T-accounts provided on the attachment (end of Project) for the following accounts: “cash & cash equivalents”, “short-term investments”, “merchandise inventory-original”, “prepaid expenses”, “accounts payable”, “wages and salaries payable”, “income taxes payable”, “long-term note payable”, “common stock – no par”, retained earnings. You will be instructed on what beginning balances to include for the other accounts. Make sure you use only these T accounts and DO NOT create any new accounts. In questions 5 and 6, you will be instructed on how to use the “accounts receivable, net” and “Plant Assets, net” to determine beginning balances. All other accounts will have zero beginning balances. a. Prepaid Expenses and Short-term investments: (Discussed in LPacket 1 items 12 thru 15):

 i. Assume Cabot paid $88,000 for prepaid expenses during the year 2022. Prepare a summary journal entry to record the purchases. Make sure you include your journal entry in Attachment 2. (End of the “file part”). 

ii. Assume unexpired prepaid expenses at the end of year 2 were calculated to be $5,200. Calculate the expense and prepare the journal entry to adjust the prepaid expense account. Make sure you include your journal entry in Attachment 2. (end of the file). Remember to only use the accounts provided in Attachment 1. This means you will need to record the expense as “operating” or “non-operating”.

iii. Cabot Corporation decided to liquidate all their short-term investments to be able to use the funds for the expansion. Prepare the journal entry to record the sale of short-term investments for cash. Note – Assume these were sold at recorded value and there was no gain or loss. Make sure you include your journal entry on Attachment 2. b. Post the journal entries from Attachment 2 to the T-accounts on Attachment 1.