Pine Corporation makes adjusting entries monthly. As of March 31, the general ledger shows Prepaid Rent to have a debit balance of $6,000. Rent expires at a rate of $1,200 per month. No entry for rent has been recorded in the month of March. What adjusting entry is necessary at March 31?
A) Prepaid Rent 500 Cash 500
B) Rent Expense 1,200 Cash 1,200
D) Prepaid Rent 6,000 Rent Expense 6,000

Question

Pine Corporation makes adjusting entries monthly. As of March 31, the general ledger shows Prepaid Rent to have a debit balance of $6,000. Rent expires at a rate of $1,200 per month. No entry for rent has been recorded in the month of March. What adjusting entry is necessary at March 31?
A) Prepaid Rent 500 Cash 500 
B) Rent Expense 1,200 Cash 1,200 
D) Prepaid Rent 6,000 Rent Expense 6,000

Quizplus · Accepted Answer

Since the prepaid rent has not expired as of March 31, the company needs to recognize the rent expense for the month of March. The adjusting entry that should be made is to debit Rent Expense for $1,200 and credit Prepaid Rent for $1,200. This will reduce the prepaid rent balance by $1,200 to $4,800 and recognize the expense for the month of March.

Pine Corporation Makes Adjusting Entries Monthly