Happy Company signed a two-year lease on July 1, 2019, and paid
the $34,800 total rent in advance. Happy recorded the transaction
as a debit to Prepaid Rent and a credit to Cash.
What adjusting entry should Happy make on December 31, 2019 (no
previous adjustment has been made)?
Select one:
A.
Rent Expense |
8,700 |
Prepaid Rent |
8,700 |
B.
Prepaid Rent |
26,100 |
Rent Expense |
26,100 |
C.
Rent Expense |
17,400 |
Prepaid Rent |
17,400 |
D.
Prepaid Rent |
8,700 |
Rent Expense |
8,700 |
Ans is A
Rent Expense |
8,700 |
Prepaid Rent |
8,700 |
Reason:-
Rent expense till 31st December 2019 | |
8700 | 34800/24*6 |
Rent expense (8700), hence debited. | |
Prepaid rent will be reduced, hence credited | |
Entry will be:- | |
Rent expense Dr | 8700 |
Prepaid rent Cr | 8700 |
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