On July 1 the Fisher Shoe Store paid $24000 to Acme Realty for 6 months rent beginning July 1.Prepaid Rent was increased for the full amount.If financial statements are prepared on July 31 the adjustment to be made by the Fisher Shoe Store is:

Question

Quizplus · Accepted Answer

Since financial statements are being prepared on July 31, Fisher Shoe Store has only used one month's worth of rent (July 1-31). Therefore, the amount to be expensed is $4000 (1/6 of the total rent). Prepaid Rent should be decreased by the same amount, $4000. Thus, the adjustment to be made is to increase Rent Expense $4000 and decrease Prepaid Rent $4000.

On July 1 the Fisher Shoe Store Paid $24000 to Acme