Question

prepare the horizontal model for each of the following transactions. a. to record the payment on july 1, assuming that all $27,000 is initially recorded as rent expense. b. to record the adjustment that would be appropriate at july 31 if your entry in a had been made. c. to record the payment on july 1, assuming instead that all $27,000 is initially recorded as prepaid rent. d. to record the adjustment that would be appropriate at july 31 if your entry in c had been made. e. to record the adjustment that would be appropriate at august 31 and september 30, regardless of how the payment on july 1 had been initially recorded (and assuming that the july 31 adjustment had been made). indicate the financial statement effect. (enter decreases with a minus sign to indicate a negative fina

Answer 1

As a supervision to the bookkeeper, it is advised that the payment be initially recorded as a debit to Prepaid rent. Rent is paid at the start of the relevant quarter, hence this is the correct accounting technique. Because it resembles an advance payment, it needs to be recognized as an asset when the payment is made. The portion of the rent that has expired each month should be included to the rent expense.

Is Prepaid rent A current liabilities?

Simply said, prepaid rent is shown under current assets on the balance sheet since it is common for businesses to pay the rent in advance and to use it within a short period of time after payment, typically during the same financial period.

Rent that has been paid in advance can be used to offset future rent expenses, making it an asset.

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