Required 1: The proper balance of Rent Expense showing on the year-end income statement is $5,250. Calculation: The rent expense is for the entire year of which four months fall in this accounting period. Therefore, we need to accrue four months’ rent. The monthly rent would be $21,000 ÷ 12 = $1,750. Thus, four months’ rent would be $1,750 × 4 = $7,000. Rent Expense for the four months = $7,000 Prepaid Rent for the four months = $7,000 Rent Expense balance on income statement = $21,000 – $7,000 = $14,000 Required 2: The proper amount of Prepaid Rent showing on the year-end balance sheet is $7,000. Calculation: The prepaid rent is for four months. The monthly rent is $21,000 ÷ 12 = $1,750. Prepaid Rent = $1,750 × 4 = $7,000. Therefore, the proper amount of Prepaid Rent showing on the year-end balance sheet is $7,000.