Question

Chan Sports purchases one year of rent on November 1 for $12,000 ($1,000 per month), debiting Prepaid Rent. On December 31, Chan Sports would record the following year-end adjusting entry:

a. Rent Expense 2,000
Prepaid Rent 2,000
b. Rent Expense 10,000
Prepaid Rent 10,000
c. Rent Expense 12,000
Prepaid Rent 12,000
d. No entry is required on December 31 because full cash payment was made on
November 1.

Answer 1

a. Rent Expense 2,000

Prepaid Rent 2,000

Step-by-step explanation:

On December 31, Chan Sports would record the following year-end adjusting entry:

a. Rent Expense 2,000

Prepaid Rent 2,000

Because two months Prepaid rent had expired on 31st December and the Prepaid Rent would decrease by $ 2000. The remaining Prepaid rent would be $ 10,000 and rent expense would be $ 2000. So we credit Prepaid Rent $ 2000 and debit Rent Expense $ 2000.