Question

On March 1, 20X1, the company paid $12,000 rent in advance for a 12-month period. On December 31, 20X1, the company's adjustment for expired rent would include:

a) Debit to Rent Expense, Credit to Prepaid Rent
b) Debit to Prepaid Rent, Credit to Rent Expense
c) Debit to Rent Expense, Credit to Cash
d) Debit to Prepaid Rent, Credit to Cash

Answer 1

On December 31, 20X1, the company's adjustment for expired rent would include a debit to Rent Expense and a credit to Prepaid Rent.

Step-by-step explanation:

The company paid $12,000 rent in advance for a 12-month period on March 1, 20X1. On December 31, 20X1, the company's adjustment for expired rent would include a debit to Rent Expense and a credit to Prepaid Rent. This is because the rent that was prepaid at the beginning of the year has now been used up or expired, and needs to be recognized as an expense in the current accounting period.