Prepaid expenses—rent
(Note: See Problem 7.21 for the related unearned revenue accounting.) On November 1, 2010, Wenger Co. paid its landlord $25,200 in cash as an advance rent payment on its store location. The six-month lease period ends on April 30, 2011, at which time the contract may be renewed.Required:
a. Use the horizontal model or write the journal entry to record the six-month advance rent payment on November 1, 2010.
b. Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amount of rent “used” during the month.
c. Calculate the amount of prepaid rent that should be reported on the December 31, 2010, balance sheet with respect to this lease.
d. If the advance payment made on November 1, 2010, had covered an 18-month lease period at the same amount of rent per month, how should Wenger Co. report the prepaid amount on its December 31, 2010, balance sheet?
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