San Diego Company paid $36,000 for May, June, July, and August rent in advance.The company recorded this transaction by increasing the balance in the Prepaid Rent account.The balance in the Prepaid Rent account as of July 1 is_____.
A)$-0-
B)$9,000
C)$18,000
D)$27,000

Question

Quizplus · Accepted Answer

The company paid rent for 4 months in advance, which means the rent for each month is $9,000 ($36,000/4). As of July 1, there were two months (May and June) already passed, so the rent that has been used up is $18,000 (2 months * $9,000). Therefore, the balance in the Prepaid Rent account as of July 1 is $18,000.

San Diego Company Paid $36,000 for May, June, July, and August