On October 1,Year 1,Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200.On December 31,Year 1,the required adjusting entry was recorded.What are the adjusted account balances at December 31,Year 1?

Question

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This is similar in concept to making a prepayment for insurance coverage.The monthly rent is $100 ($1,200 ÷ 12 months).By December 31,the company had rented (used)the office space for three months.The Prepaid Rent account has an adjusted balance of $900 ($1,200 - $300).The Rent Expense account will reflect the rent for those three months of $300 ($100 × 3).

On October 1,Year 1,Senegal Company Paid $1,200 in Advance for Rent