M4-5 Determine Accounting Equation Effects of Deferral Adjustments [LO 4-2] For each of the following transactions for the Sky Blue Corporation, give the accounting equation effects of the adjustments required at the end of the month on October 31. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.) Collected $2,400 rent for the period October 1 to December 31, which was credited to Deferred Revenue on October 1. Paid $1,200 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount. Used a machine purchased on October 1 for $48,000. The company estimates annual depreciation of $4,800.

Collected $2,400 rent for the period October 1 to December 31

which was credited to Deferred Revenue on October 1.

Account Receivable Assets Decrease - 2400

Deferred revenue Liabilities Decrease - 2400

Paid $1,200 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount.

Expense insurance Equity Decrease - 1200

Prepaid amount Asset Decrease - 1200

Used a machine purchased on October 1 for $48,000. The company estimates annual depreciation of $4,800.

4800 12 400 3 1200

Expense depreciation Equity Decrease - 1200

Depreciation accumulate Asset Decrease - 1200

Explanation:

Collected $2,400 rent for the period October 1 to December 31

which was credited to Deferred Revenue on October 1.

Account Receivable Assets Decrease - 2400

Deferred revenue Liabilities Decrease - 2400

Paid $1,200 for a two-year insurance premium on October 1 and debited Prepaid Insurance for that amount.

Expense insurance Equity Decrease - 1200

Prepaid amount Asset Decrease - 1200

Used a machine purchased on October 1 for $48,000. The company estimates annual depreciation of $4,800.

4800 12 400 3 1200

Expense depreciation Equity Decrease - 1200

Depreciation accumulate Asset Decrease - 1200