In October, your company prepays rent of $7,000 for November and December. Which of the following describes the effects of this transaction in October?
A) Assets decrease $7,000 and liabilities decrease $7,000.
B) Assets increase $7,000 and stockholders' equity increases $7,000.
C) There is no change to total assets, liabilities or stockholders' equity.
D) Liabilities decrease $7,000 and stockholders' equity increases $7,000.

Question

Quizplus · Accepted Answer

Prepaying rent increases one asset account (Prepaid Rent) and decreases another asset account (Cash), resulting in no net change to total assets, liabilities, or stockholders' equity.

In October, Your Company Prepays Rent of $7,000 for November