On March 1, 2019, the company paid $6,000 rent in advance for a 12-month period. On December 31, 2019, the company's adjustment for expired rent would include:

Question

Quizplus · Accepted Answer

The adjustment for expired rent at the end of the year would involve recognizing the portion of the prepaid rent that has been used up during the year. As of December 31, 2019, the company would have used up 10 months of the prepaid rent ($6,000 / 12 months x 10 months = $5,000). Therefore, the adjustment would involve debiting Rent Expense for $5,000 (to recognize the expense for the portion of the rent that has been used up) and crediting Prepaid Rent for $5,000 (to reduce the balance of the prepaid rent to its remaining amount of $1,000). The correct answer is option C.

On March 1, 2019, the Company Paid $6,000 Rent in Advance