Question

Gracie, inc. made a prepaid rent payment of $2,800 on january 1. the company's monthly rent is $700. the amount of prepaid rent that would appear on the january 31 balance sheet after adjustment is

Answer 1

Out of the prepaid rent of $2800, $700, the actual rent for the month of January, has to be debited to rent account and prepaid rent account will be credited. Now the prepaid rent account will show a smaller figure(2800-700 = 2100) This is the amount that will be shown in the prepaid rent account in the balance sheet. Of course it will be shown as an asset since it has a debit balance.