Continuation
a. Prepare the horizontal model to record the six-month advance rent payment on November 1, 2019. (+ for increase and – for decrease).
b. Prepare the journal entry to record the six-month advance rent payment on November 1, 2019
c. Prepare the horizontal model that will be made at the end of every month to show the amount of rent "used" during the month. (+ for increase and – for decrease).
d. Prepare the adjusting entry that will be made at the end of every month to show the amount of rent "used" during the month.
e. Calculate the amount of prepaid rent that should be reported on the December 31, 2019, balance sheet with respect to this lease.
Answer:
a.
Assets
Cash: -$31,800
Prepaid Rent: +31,800
b.
Date. General Journal Debit (Dr) Credit (Cr)
November 01, 2019. Prepaid Rent. $31,800 (dr)
Cash. $31,800 (Cr)
c.
The rent during the month = $31,800/6 = $5,300
Assets. -------------- Expense
Prepaid Rent: -$5300. --------------- Rent Expense: +$5,300
d.
The rent during the month = $31,800/6 = $5,300
Event --------- General Journal ------ Debit (dr) ---- Credit (Cr)
1. -------- Rent Expense. ---- $31,800
--------- Prepaid Rent. -------- ------ $31,800 (Cr)
e.
At the emd of December, 2 months has already expired.
So, he has used 2/6 of his rent.
2/6 of $31,800
= $10,600
The remaining which is 4/6 will be the prepaid rent that will be entered in the balance sheet as the current assets.
The 4/6 is calculated as:.
4/6 * $31,800
= $21,200
