Question

Purdue Company signed a one-year lease on April 1, 2017, and paid the $45,600 total yearâs rent in advance. Purdue recorded the transaction as a debit to Prepaid Rent and a credit to Cash. What adjusting entry should Purdue make on December 31, 2017 (no previous adjustment has been made)?

Answer 1

Answer:

Rent expense debit and credit prepaid rent

Explanation:

Prepaid expense refers to those expenses that have been paid in advance before they are accrued. Some examples prepaid expenses are prepaid rent and prepaid insurance.

Prepaid expenses are debited and cash is credited at the time expenses are paid in advance. At the end of the year, adjustment entry is made when the expense expires. Following is the adjustment entry made at the end of the year:

Date                        Particulars                          Debit($)                 Credit($)

December               Rent expense                     45,600

31'2017                           Prepaid expenses                                       45,600

                                (To record expired prepaid

                                  rent)