Question

ABC Tax Planning Service started business in January 2018. The company rented an office for 7,000 per month starting from January​ 1, 2018. On that​ day, ABC prepaid the rent through June 30. The company makes adjusting entries at the end of each month. What is the balance in the Prepaid Rent account as of April​ 30, 2018?

A.$ $3,500
B.$7,000
C.$14,000
D.$ 1,167

Answer 1

The answer is: C) $14,000

Step-by-step explanation:

ABC Tax Planning Services paid six months of rent in advance, from January to July. It spends $7,000 per month on rent, so the six months prepaid rent would be $42,000. On April 30, 2018, ABC had already rented the offices for 4 months, so it had only two months left in its Prepaid Rent account, equivalent to $14,000 (2 x $7,000).