Question

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store adjusting entry to be made by the Fisher Shoe Store is:
A. debit Rent Expense, $24,000; credit Prepaid Rent, $4,000.
B. debit Prepaid Rent, $4,000; credit Rent Expense, $4,000.
C. debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.
D. debit Rent Expense, $24,000; credit Prepaid Rent, $20,000.

Answer 1

Answer:

C) debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.

Explanation:

July 1, prepaid rent fro 6 months

Dr Prepaid rent 24,000

    Cr Cash

July 31, adjusting entry to record rent expense

Dr Rent expense 4,000

    Cr Prepaid rent 4,000

total prepaid rent = 24,000 for six months

after one month, 24,000 / 6 = 4,000 must be recorded as rent expense and prepaid rent must be credited.