Question

On April 1, 2011, Technapine paid $30,000 for rent on warehouse space one year in advance. On October 1, 2011, Technapine entered into a lease agreement to rent out its old warehouse space it was no longer using. This agreement calls for Technapine to receive $2,000 per month from the lessee, due and payable at the end of the 4-month lease term. At December 31, 2011, none of the rental payments from the lessee had yet been received. 2. If Technapine makes the appropriate adjusting entry, how much will be reported on the December 31, 2011 income statement for rent expense? A) $22,500 B) $30,000 C) $ 7,500 D) $25,000 3. If Technapine makes the appropriate adjusting entry, how much will be reported on the December 31, 2011 balance sheet as prepaid rent and rent receivable, respectively? A) $22,500 and $2,000 B) $ 7,500 and $8,000 C) $22,500 and $7,500 D) $ 7,500 and $6,000

Answer 1

2) 30000*9months/12 months = 22500

$22500 will be reported as rent expense on the income statement.

Option A is correct.

3) Prepaid Rent = 30000 - 22500 = 7500

Rent receivable = (2000*4)*3/4 = 6000

Option D is correct.