(The effect of different lease arrangements on the financial statements, LO 3, 4, 5)

Kashabowie Properties Ltd. (Kashabowie) owns and operates several commercial real estate properties in Halifax. On August 20, 2004 Kashabowie signed a three-year lease with a consulting firm for space in one of its buildings. Monthly rent is $1,000.

For each situation below show what would appear on Kashabowie’s balance sheet and income statement if these statements were prepared on September 1, 2004 and on September 30, 2004. For each situation show all journal entries prepared in August and September 2004. Indicate whether each journal entry is a transactional or adjusting journal entry.

a. On August 20, 2004 Kashabowie receives the $1,000 rent payment for September. The lease agreement requires the consulting firm to pay each month’s rent on the first day of the month (so October’s rent is due on October 1).

b. Kashabowie agrees to allow the consulting firm to pay its rent in arrears so that its rent is due on the first day of the next month (so September’s payment is due October 1 and so on).

c. Kashabowie agrees to allow the consulting firm to pay its rent on the 15" of each month. The first month’s rent is paid on August 20 (so the payment on September 15 is for October).

d. Kashabowie agrees to allow the consulting firm to pay its rent on the 15" of each month. The first month’s rent is paid on September 15 (so the payment on September 15 is for September).