Question

The balance of prepaid rent, $6,360, represents payment on October 31, 2024, for rent from November 1, 2024, to April 30, 2025. Record the adjusting entry on December 31.

Answer 1

To record the adjusting entry on December 31 for prepaid rent, we need to account for the portion of rent that has been used up from November 1 to December 31.

Step-by-step explanation:

To record the adjusting entry on December 31 for prepaid rent, we need to account for the portion of rent that has been used up from November 1 to December 31. Since there are 6 months covered by the prepaid rent, and 2 months have already passed, we need to record the expense for 4 months (November, December, January, and February).

1. Debit Rent Expense for 4 months: $4,240 (6,360 / 6 months * 4 months)
2. Credit Prepaid Rent for 4 months: $4,240

This adjusting entry recognizes the expense for the portion of rent that has expired, and reduces the balance of the prepaid rent accordingly.