If on January 1 of this year, a company paid $12,000 rent for one year and adjusting entries are made at the end of each month, the balance of Prepaid Rent at December 1 of this year should be $1,000.

Question

Quizplus · Accepted Answer

Since the company paid $12,000 rent for one year on January 1, the entire amount of rent paid is considered prepaid rent. At the end of each month, 1/12th of the prepaid rent ($1,000) is expensed as rent for that month, and the remaining balance of prepaid rent is adjusted accordingly. By December 1, 11/12 of the prepaid rent should have been expensed, leaving a remaining balance of $1,000. Therefore, the answer is A.

If on January 1 of This Year, a Company Paid