Asked by Cassandra Lorenzo on Jul 17, 2024
Verified
The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
A) debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
B) debit Prepaid Rent, $24,000; credit Rent Expense, $8,000
C) debit Rent Expense, $24,000; credit Prepaid Rent, $8,000
D) debit Prepaid Rent, $8,000; credit Rent Expense, $8,000
Prepaid Rent
An expense that is paid in advance for the use of property or equipment, recognized over the period of usage.
Adjusting Entry
A journal entry made in accounting records at the end of an accounting period to allocate income and expenses to the periods in which they actually occurred.
Rent Expense
The cost incurred by a business to utilize property or equipment for operational purposes, recognized as an expense on the income statement.
- Delineate the distinctions between prepaid expenses and the related adjustment entries they necessitate.
Verified Answer
TG
The Galactic ChurroJul 20, 2024
Final Answer :
A
Explanation :
The $32,000 prepaid rent covers four months, so one month's rent is $32,000 / 4 = $8,000. By December 31, one month has passed, requiring an adjustment of $8,000 to Rent Expense to reflect the rent expense for December, and reducing Prepaid Rent by the same amount.
Learning Objectives
- Delineate the distinctions between prepaid expenses and the related adjustment entries they necessitate.