The balance in the Prepaid rent account before adjustment at the end of the year is $12,000 and represents three months' rent paid on 1 December. The adjusting entry required on 31 December is:
A) Debit Prepaid rent, $4,000; Credit Rent expense $4,000.
B) Debit Prepaid rent, $8,000; Credit Rent expense, $8,000.
C) Debit Rent expense, $12,000; Credit Prepaid rent, $12,000.
D) Debit Rent expense, $4,000; Credit Prepaid rent, $4,000.

Question

Quizplus · Accepted Answer

The adjusting entry required on 31 December is Debit Rent Expense, $4,000; Credit Prepaid Rent, $4,000. This is the amount of the benefit that has been consumed at 31 December ($12,000/3).

The Balance in the Prepaid Rent Account Before Adjustment at the End