Question

The balance in the prepaid rent account before adjustment at the end of the year is $13,584, which represents 12 months' rent paid on December 1. The adjusting entry required on December 31 is

a-debit Rent Expense, $12,452, credit Prepaid Rent, $1,132
b-debit Rent Expense, $1,132, credit Prepaid Rent, $1,132
c-debit Prepaid Rent, $12,452, credit Rent Expense, $1,132
d-debit Prepaid Rent, $1,132, credit Rent Expense, $1,132

Answer 1

The adjusting entry required on December 31 is debit Rent Expense, $12,452, credit Prepaid Rent, $1,132. This entry reduces the prepaid rent balance and recognizes the expense in the period it is incurred. The correct option is A

Step-by-step explanation:

The adjusting entry required on December 31 is debit Rent Expense, $12,452, credit Prepaid Rent, $1,132. To understand why this adjusting entry is necessary, we need to consider the concept of prepaid rent. Prepaid rent refers to the amount of rent paid in advance for future periods.

In this case, the prepaid rent balance is $13,584, representing 12 months' rent paid on December 1. However, by the end of the year, only one month of rent has been used. The adjusting entry adjusts the accounts to reflect the amount of rent used during the year.

It debits Rent Expense for the amount of rent used, which is $12,452, and credits Prepaid Rent for the same amount. This reduces the prepaid rent balance and recognizes the expense in the period it is incurred.