Question

ABC Tax Planning Service started business in January 2018. The company rented an office for $1,000 per month starting from January 1, 2018. On that day, ABC prepaid the rent through June 30 (six months). The company makes adjusting entries at the end of each month. What is the balance in the Prepaid Rent account as of May 30, 2018?

Answer 1

The correct answer is $1,000.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Prepaid amount of month = 6 months

Rent per month = $1,000

So period till May.30 = 5 months

So balance period = 6 months - 5 months = 1 month

So, Prepaid rent = Balance period × Rent per month

By putting the value, we get

= 1 month × $1,000

= $1,000