On June 1,Norma Company signed a 12-month lease for warehouse space.The lease requires monthly rent of $550,with 4 months paid in advance.Norma Company records the payment by debiting Prepaid Rent $2,200 and crediting Cash $2,200.At the end of June,what should be the balance of Norma's Prepaid Rent account?

Question

Quizplus · Accepted Answer

Since the lease requires monthly payments of $550 and 4 months were paid in advance, the total amount paid for rent is $2,200. At the end of June, only one month has passed, so the amount of rent that has been recognized as an expense is $550. Therefore, the balance of the Prepaid Rent account should be $2,200 - $550 = $1,650.

On June 1,Norma Company Signed a 12-Month Lease for Warehouse