Question

On May 1, Year 1, Garcia Company paid $1,200 for 12 months of rent and recorded the transaction in an income statement account. The adjusting journal entry required on December 31, Year 1, will require a:

Answer 1

Will require a credit to the account "Expenses" $400 and a debit to the account "pay in advance" $400

Step-by-step explanation:

On December 31 you need to reflect the accrual until this day, no more, if the company recorded the total amount on May 1, then you need to adjust the value on the income statement and put only the value accrual until this moment.

Please see details bellow:

Debit: $400 Expenses pay in advance (Assets in the Balance Sheet)

Credit: $400 Expenses Account (Income Statement Account)