A new company signed a lease for office space during their first month of business.At that time they paid a total of $12,000 for first and last months' rent.At the end of the first month, the effect on the financial statements would be:
A)$12,000 rent expense
B)$6,000 rent expense and $6,000 prepaid rent on the balance sheet
C)$12,000 prepaid rent on the balance sheet
D)Nothing recorded because the company has not made any sales yet

Question

Quizplus · Accepted Answer

Since the company paid for both the first and last months' rent, at the end of the first month they would have used up $6,000 worth of rent expense (reflecting the first month) and the remaining $6,000 would be considered prepaid rent and reflected on the balance sheet.

A New Company Signed a Lease for Office Space During