Question

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was increased for the full amount. If financial statements are prepared on July 31, the adjustment to be made by the Fisher Shoe Store is: increase Rent Expense, $24,000; decrease Prepaid Rent, $4,000. increase Prepaid Rent, $4,000; decrease Rent Expense, $4,000. increase Rent Expense, $4,000; decrease Prepaid Rent, $4,000. increase Rent Expense, $24,000; decrease Prepaid Rent, $20,000.

Answer 1

Answer:

Increase Rent Expense, $4,000; decrease Prepaid Rent, $4,000.

Explanation:

Since Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1, we will calculate monthly rent amount by:

24,000/6 = $4,000

Financial statements are prepared on July 31, so we will adjust the July rent in the adjusting entry.

We will debit the rent expense by $4,000 and credit the prepaid rent which is an asset to decrease it by an amount of $4,000.