1. Refer to M4-8. Prepare a classified statement of financial position in good form at December 31, 2018.
2. Explain how the adjustments in M4-4 and M4-6 affected the operating, investing, and financing activities on the statement of cash flows.

M 4-8

M 4-4

In each of the following transactions (a) through (c) for Romney's Marketing Company, use the three-step process illustrated in the chapter to record the adjusting entry at year-end December 31, 2018. The process includes (1) determining if revenue was earned or an expense incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment.
a. Collected $1,200 rent for the period December 1, 2018, to April 1, 2019, which was credited to deferred rent revenue on December 1, 2018.
b. Purchased a machine for $32,000 cash on January 1, 2014. The company estimates annual depreciation for the year 2018 at $3,200.
c. Paid $5,000 for a two-year insurance premium on July 1, 2018; debited prepaid insurance for that amount.

M 4-6

In each of the following transactions (a) through (c) for Romney's Marketing Company, use the three-step process illustrated in the chapter to record the adjusting entry at year-end December 31, 2018. The process includes (1) determining if revenue was earned or an expense incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future,
and (3) computing the amount of the adjustment.
a. Estimated electricity usage at $450 for December; to be paid in January 2019.
b. On September 1, 2018, loaned $6,000 to an officer who will repay the loan principal and interest in one year at an annual interest rate of 5 percent.
c. Owed wages to 10 employees who worked four days at $200 each per day at the end of December 2018. The company will pay employees at the end of the first week of January 2019.

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Debit Credit Cash Accounts receivable Interest receivable Prepaid insurance Notes receivable (long-term) Equipment Accumulated depreciation Accounts payable Accrued expenses payable Income taxes payable Deferred rent revenue Contributed capital (800 shares) Retained earnings Sales revenue Interest revenue Rent revenue Wages expense Depreciation expense Utilities expense Insurance expense Rent expense Income tax expense Total 1,500 2,200 100 1,600 2,800 15,290 3,000 2,400 3,920 2,700 500 3,700 2,000 38,500 100 800 19,500 1,800 380 750 9,000 2,700 57,620 57,620