On November 1, Juan paid $24,000 in advance for a year's rent. The November 30 adjusting entry for rent expense should include

Question

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Since Juan paid $24,000 in advance for a year's rent, the entire amount is recorded as a debit to Prepaid Rent. However, at the end of November, one month has passed and the portion of the prepaid rent that has been used up is $2,000 ($24,000/12 months = $2,000 per month). Therefore, the adjusting entry is a debit to Rent Expense, $2,000, and a credit to Prepaid Rent, $2,000. This reflects the portion of the prepaid rent that has been used up during the month of November. Option A is incorrect because it would debit the entire $24,000, not just the portion used up during November. Option B is incorrect because it would credit Prepaid Rent with the entire $24,000, which is not reflective of the portion used up during November. Option D is incorrect because it does not reflect the decrease in prepaid rent or the increase in rent expense.

On November 1, Juan Paid $24,000 in Advance for a Year's