Laguna Company paid $16,000 for January, February, March, and April rent in advance.The balance in the Prepaid Rent account as of January 31 is: _____.
A)$-0-
B)$4,000
C)$12,000
D)$16,000

Question

Quizplus · Accepted Answer

The prepaid rent account represents an asset, and since the company paid rent in advance for four months, the balance in the account would be $16,000 as of January 31. However, since January's rent has already been used up, we need to subtract the amount of January's rent ($4,000) from the balance in the account. Therefore, the correct answer is $12,000 (choice letter C).

Laguna Company Paid $16,000 for January, February, March, and April