Question

The prepaid rent account has a balance of $24,000 representing 8 months of rent. Two months of time have transpired since the rent was prepaid. The adjusting entry to record the expired rent would be to:

a. Debit Prepaid Rent $6,000, Credit Rent Expense $6,000
b. Debit Rent Expense $6,000, Credit Prepaid Rent $6,000
c. Debit Prepaid Rent $18,000, Credit Rent Expense $18,000
d. Debit Rent Expense $18,000, Credit Prepaid Rent $18,000

Answer 1

To record expired rent after two months on a prepaid rent of $24,000 for eight months, one would Debit Rent Expense and Credit Prepaid Rent by $6,000, which represents the rent expense for the two months that have elapsed.

Step-by-step explanation:

The correct answer to the question entails understanding the adjustment for the prepaid rent after a certain period has elapsed. Since two months have passed, two months of rent are now an expense.

To record the expired rent, which is the portion of prepaid rent that now counts as an expense, we would create an adjusting entry. For two months out of the $24,000 covering 8 months, we calculate the monthly rent as $24,000 / 8 = $3,000 per month. Therefore, for two months, the expense would be 2 * $3,000 = $6,000.

The correct adjusting entry is to Debit Rent Expense $6,000, representing the cost of rent for the two months that have transpired, and to Credit Prepaid Rent $6,000 to reduce the balance of the Prepaid Rent account by the amount that has been used up.

The correct answer is b. Debit Rent Expense $6,000, Credit Prepaid Rent $6,000