Question

On November 1, 2013, Wenger Co. paid its landlord $4,260 in cash as an advance rent payment on its store location. The six-month lease period ends on April 30, 2014, at which time the contract may be renewed. Required: a.1 Prepare the horizontal model to record the six-month advance rent payment on November 1, 2013. (+ for increase and – for decrease).

Answer 1

The journal entry should be:

November 1, 2013, six months of rent paid in advance

Dr Prepaid rent 4,260

Cr Cash 4,260

Assets = liabilities + equity

cash prepaid rent

-$4,260 $4,260 $0 $0

Revenues - Expenses = Net income

$0 $0 $0

This operation represents an operating cash flow activity.