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8 November, 15:11

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A company rents office space for $10,000. The company hasn't yet recorded payment as an expense in the financial statements because it hasn't started using the premises.

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  1. 8 November, 15:25
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    Response is given below;

    Explanation:

    The company needs to record expense from the date tenancy agreement is entered irrespective of whether the company is using premises or not.

    If the rent is paid in advance, the journal entry will be

    Prepaid rent Dr.$10,000

    Cash Cr.$10,000

    This prepaid rent will be adjusted by the time the premises is used. Suppose at beginig of the month, the rent was paid in advance for which above entry was recorded. Now at end of the month, the journal entry will be;

    Rent Expense Dr.$10,000

    Prepaid Rent Cr.$10,000
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