The journal entry to adjust the prepaid rent account for rent used during the period results in an increase in expenses and a decrease in stockholders' equity.

Question

Quizplus · Accepted Answer

Adjusting the prepaid rent account for rent used during the period means that a portion of the prepaid rent, which was previously recorded as an asset, is now recognized as an expense. This results in an increase in expenses which decreases the net income and subsequently decreases the retained earnings, a component of stockholders' equity.

The Journal Entry to Adjust the Prepaid Rent Account for Rent