Lis-comb Consulting is a partnership of business consultants located in Halifax. The company has been successful since it began business five years ago and the partners have decided to move into new offices. On August 20, 2016, the partners came to terms with a property owner and signed a three-year lease for space at a prestigious address. Liscomb occupied its new offices on September 1, 2016. Monthly rent is $1,000. For each situation below, show what would appear on Liscomb’s balance sheet and income statement if these statements were prepared on September 1, 2016 and on September 30, 2016. For each situation, show all journal entries pre-pared in August and September 2016. Indicate whether each journal entry is a transactional or adjusting entry. Consider each situation separately.
a. On August 20, 2016, Liscomb pays the property owner rent for September and agrees to pay each month’s rent on the first day of the month (so October’s rent is due on October 1).
b. The property owner agrees to allow Liscomb to pay its rent in arrears so that the rent is due on the first day of the next month (so September’s rent is due October 1, and so on).
c. The property owner agrees to allow Liscomb to pay its rent on the 15th of each month. The first month’s rent is paid on August 20 (so the payment on September 15 is for October).
d. The property owner agrees to allow Liscomb to pay its rent on the 15th of each month. The first month’s rent is paid on September 15 (so the payment on September 15 is for September).