The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
A) debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
B) debit Prepaid Rent, $24,000; credit Rent Expense, $8,000
C) debit Rent Expense, $24,000; credit Prepaid Rent, $8,000
D) debit Prepaid Rent, $8,000; credit Rent Expense, $8,000

Question

Quizplus · Accepted Answer

Since the $32,000 covers four months and only one month has passed by December 31, $8,000 (1/4 of $32,000) of the prepaid rent has been used. The adjusting entry should recognize this expense by debiting Rent Expense and crediting Prepaid Rent for $8,000.

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