Question

On September 1, 2016, Joy Company paid $6,000 in advance for an eight-month rental space covering the period of September, 2016 through April 2017. The deferred expense was initially recorded as an asset. Joy Company makes adjusting entries once a year at year-end. The adjusting entry on December 31, 2016 would include a ________.

Answer 1

DR. CR.

Rent Expense $3,000

Prepaid Rent $3,000

Step-by-step explanation:

Rent paid in advance = $6,000

Rent paid for the period of 8 months. On December 31, 4 months has been passed. So the rent of only 4 month will be accrued.

Accrued Rent = $6,000 x ( 4 / 8)

Accrued Rent = $3,000

Expense accrued and transferred from the prepaid rent account to rent expense account.