On May 1,San Diego Company paid $36,000 for rent.The rent covers the period May 1 through August 31.San Diego Company recorded Prepaid Rent of $36,000.What is the balance in the Prepaid Rent account on July 1?

Question

Quizplus · Accepted Answer

Prepaid Rent is initially recorded as an asset. Since the rent is for four months, the monthly portion of rent is $36,000/4 = $9,000. As of July 1, two months have passed, so the amount of rent that has been used up is 2 x $9,000 = $18,000. Therefore, the balance in the Prepaid Rent account on July 1 is $36,000 - $18,000 = $18,000. The correct answer is C.

On May 1,San Diego Company Paid $36,000 for Rent