Prepaid rent in the worksheet's trial balance column is $4,000.Prepaid rent in the balance sheet column is $2,000.Which of the following entries would have caused this difference?
A) A $2,000 debit entry to Prepaid rent in the worksheet's adjustments column
B) A $2,000 credit entry to Rent expense in the worksheet's adjustments column
C) A $2,000 credit entry to Prepaid rent in the worksheet's adjustments column
D) A $2,000 debit entry to Cash in the worksheet's adjustments column

Question

Quizplus · Accepted Answer

The $2,000 difference between the prepaid rent in the trial balance column and the balance sheet column indicates that $2,000 of prepaid rent was used during the period and should be recorded as an expense. Therefore, a credit entry of $2,000 to Prepaid rent in the adjustments column would decrease the prepaid rent balance to reflect the amount that has been used and create a corresponding increase in Rent expense. This would result in the prepaid rent balance in the balance sheet column being $2,000 lower than the prepaid rent balance in the trial balance column. A debit entry to Prepaid rent (Option A) or Cash (Option D) would increase the prepaid rent balance and make the difference greater. A credit entry to Rent expense (Option B) would increase the expense but would not explain the decrease in prepaid rent.

Prepaid Rent in the Worksheet's Trial Balance Column Is $4,000