On January 1, Mountbatten Corporation paid $14,000 for a year's advance rent on a building and recorded it as Rent Expense. The rental period begins on January 1. When financial statements are prepared on March 31, the adjusting entry should include ________. (Do not round intermediary calculations. Only round your final answer to the nearest dollar.)
A) a credit to Cash for $10,500
B) a credit to Rent Expense for $10,500
C) a credit to Prepaid Rent for $3,500
D) a debit to Rent Expense for $3,500

Question

Quizplus · Accepted Answer

The company initially recorded the entire $14,000 as Rent Expense. By March 31, only three months of rent (January, February, March) have been used, totaling $3,500 ($14,000/12 months * 3 months). Therefore, the remaining $10,500 should be credited to Rent Expense to adjust for the unused portion.

On January 1, Mountbatten Corporation Paid $14,000 for a Year's