On December 30,2014,Sheffield Industries paid $12,000 cash to its landlord to rent office space for the six-month period beginning January 1,2015.How would Sheffield record this transaction?

Question

Quizplus · Accepted Answer

Since Sheffield paid rent in advance for the upcoming six months, the transaction would be recorded as a prepaid rent. Therefore, the appropriate journal entry would be to debit Prepaid Rent for $12,000, since that asset is expected to be used over the next six months, and credit Cash for $12,000, since cash was paid for the rent in advance.

On December 30,2014,Sheffield Industries Paid $12,000 Cash to Its Landlord