Jackson Company made the annual lease payment of $9,000 for its fleet of delivery trucks.The payment was made on September 1, 2010 and covered the period September 1, 2010 to August 31, 2011.Assuming the entire amount had originally been charged to
Lease expense, the required adjustment on December 31, 2010 is

Question

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The annual lease payment is $9,000, which covers the period from September 1, 2010, to August 31, 2011. Since the payment was made on September 1, 2010, and the company's fiscal year ends on December 31, 2010, there are four months remaining until the end of the accounting period.

To adjust for the four months' worth of prepaid rent, we need to divide the annual payment by 12 (the number of months in a year) and then multiply by the number of months remaining until the end of the accounting period:

$9,000 ÷ 12 = $750 monthly payment 
$750 × 4 = $3,000 prepaid lease expense

Therefore, we need to debit prepaid lease for $3,000 (to show that a portion of the payment has already been made) and credit lease expense for $3,000 (to show that the expense has not yet been incurred).

The correct answer is B: debit prepaid lease and credit lease expense $6,000.

Jackson Company Made the Annual Lease Payment of $9,000 for Its