Identify the Type of Adjustment Necessary (The Type of Item

question 6

Essay

Identify the type of adjustment necessary (the type of item involved) and record the transaction for the event.Make sure to include the ending balances after adjustment.
Assume that on June 1, 2016, Carter Lights Corp.had paid $1,800 in advance for a 6-month insurance policy.The June 30 adjustment is: $$\begin{array} { | l | c | c | c | c | c | c | } \hline &{ \text { Assets } = } &&&{ \text { Liabilities + Stockholders' Equity } } \\\hline & \text { Cash } & \begin{array} { c } \text { Prepaid } \\\text { Insurance }\end{array} & \begin{array} { c } \text { Office } \\\text { Equipment }\end{array} & \begin{array} { c } \text { Accounts } \\\text { Payable }\end{array} & \begin{array} { c } \text { Common } \\\text { Stock }\end{array} & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline \text { Beg. Bal. } & - 1,800 & 1,800 & & & & \\\hline \text { Adjustment } & & & & & & \\\hline \text { End. Bal. } & & & & & & \\\hline\end{array}$$ ​
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Definitions:

AASB 3

The Australian Accounting Standards Board standard that deals with the accounting treatment for business combinations.

Fair Value Method

An accounting strategy that assesses assets or liabilities at their current market value, rather than at historical cost or future projected value.

Proportionate Interest Method

An accounting method used to reflect a company's stake in a joint venture by recognizing only its share of assets, liabilities, income, and expenses in its financial statements.

AASB 3

Refers to the Australian Accounting Standards Board's standard on Business Combinations, outlining requirements for the accounting treatment of mergers and acquisitions.