On November 1,2010 Clyde Corp paid $6,000 for six months rent in advance.What is the appropriate adjusting entry for December 31,2010?

Question

Quizplus · Accepted Answer

The appropriate adjusting entry for December 31,2010 is D) Rent Expense $2,000 and Prepaid Rent $2,000.

The reason for this is because on November 1,2010, Clyde Corp paid $6,000 for six months rent in advance, which means that $1,000 is allocated to each month for rent expense. By December 31, 2010, two months of rent have already been used up ($2,000). Therefore, the prepaid rent account needs to be reduced by $2,000 (from $6,000 to $4,000) and the rent expense account needs to be increased by $2,000 to reflect the portion of rent that has already been used up. This is why the adjusting entry is Rent Expense $2,000 and Prepaid Rent $2,000.

On November 1,2010 Clyde Corp Paid $6,000 for Six Months