Question

On January 1 of the current year, Aladdin Company paid $900 rent to cover six months (January through June). Aladdin recorded this transaction as follows: Journal Entry Debit Accounts Credit Date Jan 1 Prepaid Rent 900 Cash 900 Aladdin's adjusting entry at the end of February included a debit to Rent Expense in the amount of $150. What effect does the adjusting entry have on Naddin's net income for February? O A. decrease by $300 OB. decrease by $150 O C. increase by $150 OD. increase by $300 Click to select your answer Typm он re to search

Answer 1

when rent is paid in advance

prepaid rent is debited and cash is credited

As the rent is accrued each month

Rent expense is debited and Prepaid rent is credited.

So, for February $150 ($900/6months) will be debited at rent expense

	Rent expense	$150
	Prepaid rent		$150

Rent expense will be debited to income statement by $150 increasing expense and decreasing income.

Net income for February will decrease by $150

Answer B)

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