Question

On September 1, 20X1, Four Brothers Company pays $48,000 cash for six months of rent in advance. The balance of the prepaid rent account on December 31, after all adjusting entries, is:

Answer 1

Answer:

$12,000

Explanation:

the journal entry to record the payment of prepaid rent is:

September 1, 20x1, prepaid rent

Dr Prepaid rent 48,000

    Cr Cash 48,000

The adjusting entry to record rent expense on December 31, 20x1 should be:

December 31, 20x1, rent expense

Dr Rent expense 32,000

    Cr Prepaid rent 32,000

Rent expense = ($48,000 / 6) x 4 months = $32,000

the ending balance of the prepaid rent account is $12,000