Question

Which of the following does not correctly describe an adjusting journal entry that debits rent expense and credits prepaid rent?

1) The adjusting journal entry decreases the balance of the prepaid rent account.
2) The adjusting journal entry increases the balance of the rent expense account.
3) The adjusting journal entry reflects the recognition of rent expense for the period.
4) The adjusting journal entry decreases the balance of the rent expense account.

Answer 1

Option 4 is the incorrect statement because an adjusting entry that debits rent expense and credits prepaid rent increases the rent expense account balance, rather than decreasing it.

Step-by-step explanation:

The question concerns an adjusting journal entry that debits rent expense and credits prepaid rent. An adjusting journal entry is made to record the expenses that have been incurred but not yet recorded. When a company pays rent in advance, it records that payment as a prepaid rent, which is an asset. As the company uses the space over time, it needs to recognize the rent expense for the period used.

Let's look at the options to determine which one does not accurately describe the impact of the adjusting entry:

1. 
   
3. The adjusting journal entry decreases the balance of the prepaid rent account.
4. 
   
6. The adjusting journal entry increases the balance of the rent expense account.
7. 
   
9. The adjusting journal entry reflects the recognition of rent expense for the period.
10. 
    
12. The adjusting journal entry decreases the balance of the rent expense account.

Options 1, 2, and 3 are correct statements that describe the impact accurately. However, option 4 is incorrect because the adjusting journal entry does not decrease the balance of the rent expense account; it increases it.