On October 25, 2019, the company paid $24,000 rent in advance for the six-month period (November 2019 through April 2020). On December 31, 2019, the adjustment for expired rent would include:
A)a $4,000 credit to Prepaid Rent.
B)a $8,000 credit to Rent Expense.
C)a $8,000 debit to Rent Expense
D)a $24,000 credit to Cash.

Question

Quizplus · Accepted Answer

When the company paid $24,000 rent in advance for the six-month period, it would debit Prepaid Rent for $24,000 and credit Cash for $24,000.

By December 31, 2019, two months of the prepaid rent ($24,000/6 months × 2 months = $8,000) have expired. Therefore, the adjustment for expired rent would require a debit of $8,000 to Rent Expense and a credit of $8,000 to Prepaid Rent.

Option A is incorrect because it suggests that the expired rent adjustment would require a credit to Prepaid Rent, which is not true.

Option B is incorrect because it suggests that the adjustment would require a credit to Rent Expense, which is not true.

Option D is incorrect because it ignores the fact that rent has already been paid and is being expensed over the six-month period.

On October 25, 2019, the Company Paid $24,000 Rent in Advance