Question

Which journal entry is correct for adjusting the Deferred Adjustment for Rent Expense of $1000 for this month of Rent that was Prepaid?

a. Debit: Rent Expense $1000, Credit: Prepaid Rent $1000
b. Debit: Prepaid Rent $1000, Credit: Rent Expense $1000
c. Debit: Rent Expense $500, Credit: Prepaid Rent $500
d. No adjustment needed

Answer 1

The correct adjusting entry for a prepaid rent of $1000 is to debit Rent Expense for $1000 and credit Prepaid Rent for the same amount.

Step-by-step explanation:

The correct journal entry for adjusting the Deferred Adjustment for Rent Expense of $1000 for this month of Rent that was prepaid is: Debit: Rent Expense $1000, Credit: Prepaid Rent $1000. When you pay rent in advance, it is first recorded as an asset (Prepaid Rent) because it represents a future benefit. As each month passes, you need to recognize the expense for the month. You do this by reducing the asset (Prepaid Rent) and recording the expense (Rent Expense). Therefore, the correct answer to the question is a. Debit: Rent Expense $1000, Credit: Prepaid Rent $1000.