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Mariana [72]
3 years ago
6

Assume that on November 1, 2019, a 3-month rent payment for $8,000 per month (for a total of $24,000) was made with respect to a

lease that the company entered into on that date as a tenant. The company took occupancy of the rented space immediately. The lease term will expire on January 31, 2020. The $72,000 payment was recorded as a debit to Prepaid Rent on November 1, 2019.
Required:
a) The adjusting entry on December 31, 2019, is as follows _________.
Business
1 answer:
ziro4ka [17]3 years ago
7 0

Answer:

a)

Rent Expense   Dr.$16,000

Bank                  Dr.$48,000

Prepaid Rent     Cr.$64,000

Explanation:

The company entered into lease on 1st November 2019 with rent of $8,000 per month. the company on 1st November 2019 recorded prepaid rent as follows; which is wrong

Prepaid Rent Dr. $72,000

Bank              Cr. $72,000

This is wrong entry as prepaid rent was overstated by ($72,000-$24,000 ) $48,000 and same like bank was understated by $48,000

The correct entry should have been like this as on 1st November 2019;

Prepaid Rent Dr. $24,000

Bank               Cr. $ 24,000

By 31st December 2019, two months rent have already accrued so prepaid rent should be credited by (8000*2+48,000 for additional amount recorded)

<em>So the rectifying entry is; as on 31st December 2019</em>

<em>Rent Expense   Dr.$16,000</em>

<em>Bank                  Dr.$48,000</em>

<em>Prepaid Rent     Cr.$64,000</em>

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<u>Explanation:</u>

Natural unemployment always exists even in a healthy economy this is because the people keep changing their jobs and they even leave the current job in search of the new ones. Natural unemployment also includes other types of unemployment such as seasonal, structural and frictional unemployment types.

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