Question

On Dec 1, our wing stand company pays $600 for a 6 month rental of our wing truck, recording the $600 as an asset. Our fiscal year-end is Dec 31.

1. What is the journal entry when purchasing the deal?
2. What is the adjusting entry, if any, on Dec 31?
3. What would the adjusting entry be, if any, if the original entry had been recorded as an expense?

Answer 1

Solution 1:

Journal Entries
Date	Particulars	Debit	Credit
1-Dec	Prepaid rent Dr	$600.00
	To Cash		$600.00
	(To record rent payment)

solution 2:

Journal Entries
Date	Particulars	Debit	Credit
31-Dec	Rent expense Dr	$100.00
	To Prepaid rent		$100.00
	(To record rent expense)

Solution 3:

Journal Entries
Date	Particulars	Debit	Credit
31-Dec	Prepaid rent Dr	$500.00
	To Rent expense		$500.00
	(To record prepaid rent)