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Horizontal Model to show the effects on financial statements

Eden Project rents its store location. Rent is $750 per month, payable quarterly in advance. On July 1, a check for $2,250 was issued to the landlord for the July-September quarter.

Use the horizontal model to show the effects on the financial statements of Eden Project:

A. To record the payment, assuming that all @2,250 is initially recorded as Rent Expense.
B. To record the adjustment that would be appropriate at July 31 if your entry in A had been made.
C. To record the initial payment as Prepaid Rent.
D. To record the adjustment that would be appropriate at July 31 if your entry in C. had been made.
E. To record the adjustment that would be appropriate at August 31 and September 30, regardless of how the initial payment had been recorded (and assuming that the July 31 adjustment had been made).
F. If you were supervising the bookkeeper, how would you suggest that the July 1 payment be recorded? Explain your answer.

Also, as an alternative to using the horizontal model, write the journal entries to show each of these transactions and adjustment. An excel sheet is attached for more accurate input.

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Solution Summary

The use of Horizontal Models to show the effects on financial statements are examined.

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