On December 1,2014,Deana's had paid $6,000 for six months' rent beginning on that date.(Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.) How would the company record the related adjusting entry at December 31,2014?
A)Debit Rent Expense for $6,000 and credit Cash for $6,000.
B)Debit Rent Expense for $6,000 and credit Prepaid Rent for $6,000.
C)Debit Prepaid Rent for $1,000 and credit Rent Expense for $1,000.
D)Debit Rent Expense for $1,000 and credit Prepaid Rent for $1,000.
E)Debit Rent Expense for $5,000 and credit Cash for $5,000.

Question

Quizplus · Accepted Answer

At the end of December, one month of rent has been used up, so $1,000 of the prepaid rent needs to be recognized as an expense (rent expense) and moved out of the asset account (prepaid rent) with a debit to Rent Expense and a credit to Prepaid Rent. Therefore, the correct adjusting entry would be to debit Rent Expense for $1,000 and credit Prepaid Rent for $1,000.

On December 1,2014,Deana's Had Paid $6,000 for Six Months' Rent