Exercise 3-49 (Algorithmic) Prepayments, Collections in Advance Greensboro Properties Inc. owns a building in which it leases office space to small businesses and professionals. During 2019, Greensboro Properties engaged in the following transactions: a. On March 1, Greensboro Properties pald $10,560 in advance to Patterson Insurance Company for 1 year of insurance beginning March 1, 2019. The full amount of ti prepayment was debited to prepaid insurance. b. On May 1, Greensboro Properties received $35,640 for 1 year's rent from Angela Cottrell, a lawyer and new tenant. Greensboro Properties credited unearned rent revenue for the full amount collected from Cottrell. c. On July 31, Greensboro Properties received $239,400 for 6 months' rent on an office building that is occupied by Newnan and Calhoun, a regional accounting firm. T rental period begins on August 1, 2019. The full amount received was credited to unearned rent revenue. d. On November 1, Greensboro Properties paid $4,800 to Pinkerton Security for 3 months' security services beginning on that date. The entire amount was debited to prepaid security services. Required: 1. Prepare the journal entry to record the receipt or payment of cash for each of the transactions March 1 Prepaid Insurance 10.560 Cash 10,560 (Record prepayment for insurance) May 1 Cash 35.640 Unearned Rent Revenue 35.640 (Record receipt of cash for rent) 2. Prepare the adjusting entries you would make at December 31, 2019, for each of these it a. Dec. 31 Insurance Expense Cash X (Record insurance expense) Feedback Check My Work 2a. Set up T-accounts for each account. Insert any amounts that are known. Solve for the missing ar earned, and how many months of security services were used. Make the appropriate journal entry fo b. Dec. 31 - Rent Revenue X Insurance Expense X (Record earned rent revenue) Feedback Check My Work c. Dec. 31 Rent Revenue X Prepaid Rent X (Record earned rent revenue) Feedback Check My Work 2c. Set up T-accounts for each account. Insert any amounts that are known. Solve for earned, and how many months of security services were used. Make the appropriate ja d. Dec. 31 Security Services Expense (Record use of prepaid security services) 3. Conceptual Connection: What would be the total effect on the income statement and balance Jalues. a. Expenses would be understated and assets would be overstated. b. Revenues would be understated and liabilities would be overstated. C. Revenues would be understated and liabilities would be overstated. d. Expenses would be understated and assets would be overstated. Revenues Understated by $ 221,480 X Expenses Understated by $ 15,000 X Net income Understated by $ 206,480 x Assets Overstated by $ 15,000 X Liabilities Overstated by $ 221,480 x Retained earnings Understated by $ 206,480 X Feedback