Homework Answers
| Orignally transaction is recorded as below :- | ||
| Debit of Prepaid Rent by $ 2,800 and Credit of $ 2,800 | ||
| Erroneously, he again debited the Prepaid rent for 3 months assuming original recorded as rent expenses for 4 months $ 2,800/. | ||
| Hence Prepaid rent will have a balance of (2800+(700*3)) = $ 4,900/. | ||
| But prepaid rent should have a balance of $ 2,100/. | ||
| So Prepaid rent accounts is Overstated by $ 2,800/. (4900-2100) | ||
| Rent expense has no effect as he would have recorded for one month expense | ||
| So answer is Option E) | ||
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