Question

At the beginning of July, Dress Right Clothing Corporation paid $24,000 to its landlord representing one year's rent paid in advance. What is the adjusting entry to record the rent expense for the month of July?

A) Debit Rent Expense $2,000, Credit Prepaid Rent $2,000
B) Debit Rent Expense $24,000, Credit Prepaid Rent $24,000
C) Debit Prepaid Rent $2,000, Credit Rent Expense $2,000
D) Debit Prepaid Rent $24,000, Credit Rent Expense $24,000

Answer 1

The correct adjusting entry for Dress Right Clothing Corporation's July rent expense is to debit Rent Expense for $2,000 and credit Prepaid Rent for $2,000, representing the monthly portion of the annual rent paid.

Step-by-step explanation:

The adjusting entry to record the rent expense for the month of July, when Dress Right Clothing Corporation paid $24,000 for a year's rent in advance, is Debit Rent Expense $2,000, Credit Prepaid Rent $2,000.

This is because the company needs to allocate one month's worth of the prepaid rent to the current month's expense. The correct answer to the given options is A) Debit Rent Expense $2,000, Credit Prepaid Rent $2,000.

The $24,000 is paid for the whole year, so for each month, you would divide the total paid by 12, resulting in a monthly expense of $2,000.

The correct adjusting entry for Dress Right Clothing Corporation's July rent expense is to debit Rent Expense for $2,000 and credit Prepaid Rent for $2,000, representing the monthly portion of the annual rent paid.