On July 1, Runner's Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is

Question

Quizplus · Accepted Answer

Since financial statements are prepared on July 31, only one month of rent has been used. Therefore, the adjusting entry should recognize one month of rent expense and reduce the prepaid rent account by the same amount.

The adjusting entry should be:
Debit Rent Expense, $3,500
Credit Prepaid Rent, $3,500

On July 1, Runner's Sports Store Paid $14,000 to Corona