Question

On November ​1, Smart Touch Learning pays $ 6000 for the next three months of its rent ​(November through January​). At the end of its fiscal period on December 31 Smart Touch Learning would record which adjusting​ entry?

Answer 1

Smart Touch Learning would record an adjusting entry for prepaid rent at the end of its fiscal period on December 31 by reducing the prepaid rent asset and recognizing the rent expense that has been used up.

Step-by-step explanation:

Smart Touch Learning would record an adjusting entry for prepaid rent at the end of its fiscal period on December 31. This adjusting entry would involve reducing the prepaid rent asset and recognizing the rent expense for the period that has been used up.

To record this adjusting entry, Smart Touch Learning would make the following journal entry:

• Debit Rent Expense (an income statement account) for the amount of rent expense that has been used up (6000 / 3 = 2000 per month for November and December)
• Credit Prepaid Rent (a balance sheet account) for the same amount to reduce the prepaid rent asset.