Question

Happy Company signed a two-year lease on July 1, 2019, and paid the $34,800 total rent...

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

0 0
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Answer #1

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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