Bates Company paid $1,600 cash for the right to use office space during the coming year.Which of the following shows how this event would affect Bates' ledger accounts?

Question

Quizplus · Accepted Answer

Paying cash to purchase the right to use office space in the future is an asset exchange event. One asset account (cash) decreases and another asset account (prepaid rent) increases. The recognition of rent expense is deferred until a future date when the office space is used in the process of generating revenue.

Bates Company Paid $1,600 Cash for the Right to Use