Explanation:
The computation is shown below:
a. The current account balance equal to $44,400
b. The current account balance equal to
Since the company prepaid rent for two years is $44,400 but we have to compute four four months i.e from September 1 to December 31
We assume the books are closed on December 31
So, the current account balance is
= $44,400 - $7,400
= $37,000
The $7,400 is come from
= $44,400 × 4 months ÷ 24 months
= $7,400
c. And, the adjusting entry is
Rent expense A/c Dr $7,400
To Prepaid rent A/c $7,400
(Being rent expense is recorded)
