Use of Account Balances as a Basis for Adjustments

Four Star Video has been in the video rental business for five years. The following is a list of accounts for Four Star Video at May 31, 2017. It reflects the recurring transactions for the month of May but does not reflect any month-end adjustments.

Cash$4,000

Prepaid Rent6,600

Video Inventory25,600

Display Stands8,900

Accumulated Depreciation5,180

Accounts Payable3,260

Customer Subscriptions4,450

Capital Stock5,000

Retained Earnings22,170

Rental Revenue9,200

Wage and Salary Expense2,320

Utilities Expense1,240

Advertising Expense600

Four Star accrues income taxes using an estimated tax rate equal to 30% of the income for the month.

ActivityOperating

AccountsIncome Tax Payable Increase, Income Tax Expense Increase

Statement(s)Balance Sheet and Income Statement

How does this entry affect the accounting equation?

If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.