Swift Company paid $18,650 in advance for six months of rent.What journal entry will Swift prepare to record this transaction?
A)Debit Cash and credit Deferred Rent for $18,650.
B)Debit Prepaid Rent and credit Cash for $18,650.
C)Debit Cash and credit Prepaid Rent for $18,650.
D)Debit Rent Expense and credit Cash for $18,650.

Question

Quizplus · Accepted Answer

This transaction involves paying for the right to use the rented building for six months following the payment.This payment provides an economic resource to Swift (building space for six months),so it will be initially reported as an asset called Prepaid Rent.Prepaid Rent,an asset,increases while Cash,another asset,decreases.The entry includes a debit to Prepaid Rent and a credit to Cash for $18,650.

Swift Company Paid $18,650 in Advance for Six Months of Rent.What