A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired rent of $200.This adjusting entry results in:
A)$200 decrease in net income.
B)$200 increase in net income.
C)$200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D)$200 of prepaid insurance.
E)An error in the financial statements.

Question

Quizplus · Accepted Answer

The adjusting entry for expired rent decreases the balance of the Prepaid Rent account by $200, leaving a remaining balance of $400. This $200 decrease in Prepaid Rent is an expense and will be reported on the income statement as a reduction to net income. Therefore, the correct answer is A) $200 decrease in net income.

A Company Shows a $600 Balance in Prepaid Rent in the Unadjusted