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On April 1, Year 1, Maine Corporation paid $9,700 cash in advance for a one-year lease on an office building. Assume that Maine records the prepaid rent as an asset and that the books are closed on December 31. Required a. Show the payment for the one-year lease and the related adjusting entry to recognize rent expense in the accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)

MAINE CORPORATION Accounting Equations for Year 1 Assets Stockholders Equity Event Common Stock +Retained Earnings Cash Prepaid Rent Paid rent in advance Adjusting rent expense Totals

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Answer #1

Adjusting entry is passed at the end of year to adjust the effects of accrual and deferral.

Journal Entry

Prepaid Rent $9700

Cash $9700

(To record payment of rent)

Rent Expense $7275

Prepaid rent $7275

(To adjust prepaid rent)

Date AINE CO RPORATION ACCOUNTING EQUATION ololeys Aent Assets Cash- Stockmi adv auce Ad Rent 7215o -7275 Total 100 45O- -7275 7275

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