The balance in the Prepaid Rent account before adjustment at the end of the year is $24000 which represents three months' rent paid on December 1. The adjusting entry required on December 31 is to
A) debit Rent Expense $8000; credit Prepaid Rent $8000.
B) debit Rent Expense $16000; credit Prepaid Rent $16000.
C) debit Prepaid Rent $8000; credit Rent Expense $8000.
D) debit Prepaid Rent $16000; credit Rent Expense $16000.

Question

Quizplus · Accepted Answer

The $24,000 prepaid rent represents three months' worth of rent, so one month's rent is $8,000 ($24,000 / 3 months). By December 31, one month has passed, requiring an adjustment of $8,000 to reflect the rent expense for December, thus debit Rent Expense $8000; credit Prepaid Rent $8000.

The Balance in the Prepaid Rent Account Before Adjustment at the End