Question

Paid $12,000 on December 1 for 12 months' rent for the warehouse we use for storage. Give the adjusting entry to account for December's rent expense?

Answer 1

The adjusting entry for accounting for December's rent expense of $1,000 involves debiting the Rent Expense account and crediting the Prepaid Rent account by $1,000. This reflects the consumption of one month's rent out of the 12 months for which the $12,000 payment was made.

Step-by-step explanation:

The student has paid $12,000 on December 1 for 12 months' rent in advance. Since this payment covers a future period, it is initially recorded as a prepaid expense, which is an asset on the balance sheet. To account for the rent expense of December, an adjusting entry is needed.

Here is the adjusting entry for December's rent expense:

• Debit Rent Expense: $1,000 ([$12,000 ÷ 12 months])
• Credit Prepaid Rent: $1,000

This entry reflects the usage of the rented space for the month of December and reduces the Prepaid Rent account while increasing the Rent Expense account. The remaining balance of $11,000 in the Prepaid Rent account will be expensed similarly over the next 11 months.