Prepaid rent, representing rent for the next six months' occupancy, would be reported on the tenant's balance sheet as a (n)
A) asset
B) liability
C) owner's equity account
D) contra liability

Question

Quizplus · Accepted Answer

Prepaid rent is an asset because it represents a future economic benefit to the tenant in the form of rent paid for the next six months' occupancy. It is not a liability because the tenant has already paid for the future rent and does not owe any obligation to the landlord for that amount. It is not an owner's equity account or a contra liability because it does not represent any investment made by the owner or any reduction in a liability.

Prepaid Rent, Representing Rent for the Next Six Months' Occupancy