Geneva Inc, had opened for business on September 1st but did not pay rent until September 15th, when they paid $6,000 in rent for the three months of September, October and November.How would the event be recorded on the September 30?
A)Dr.Rent expense $500, Dr.Prepaid rent $5,500, Cr.Cash $6,000
B)Dr.Rent expense $2,000 Dr.Prepaid rent $4,000 Cr.Cash $6,000
C)Dr.Rent expense $6,000, Cr.Cash $6,000
D)Dr.Prepaid rent $6,000, Cr.Cash $6,000

Question

Quizplus · Accepted Answer

Since Geneva Inc. paid in advance for three months of rent, only one month's rent expense should be recorded in September. Therefore, $2,000 of rent expense would be recorded, along with $4,000 of prepaid rent, which would be an asset on the balance sheet. The full $6,000 payment would be recorded as a decrease in cash.

Geneva Inc, Had Opened for Business on September 1st but Did