Question

The balance in the prepaid rent account before adjustment at the end of the year is $11,988, which represents 12 months' rent paid on December 1. The adjusting entry required on December 31 is

a) debit Prepaid Rent, $10.989, credit Rent Expense, $999
b) debit Rent Expense, $10,989, credit Prepaid Rent, $999
c) debit Rent Expense, $999, credit Prepaid Rent, $999
d) debit Prepaid Rent, $999, credit Rent Expense, $999

Answer 1

The adjusting entry required on December 31 is debit Rent Expense, $999, and credit Prepaid Rent, $999.

Step-by-step explanation:

The adjusting entry required on December 31 is debit Rent Expense, $999, and credit Prepaid Rent, $999.

Since the prepaid rent account has a balance of $11,988 representing 12 months' rent paid on December 1, the monthly rent expense is calculated by dividing the prepaid amount by the number of months, which is $999 ($11,988 / 12 months).

Therefore, on December 31, we need to reduce the prepaid rent account by $999 (debit) and record the rent expense for the month by the same amount (credit).