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25 December, 02:06

Suppose a company rents office space for one year, paying $36,000 ($3,000/month) in advance on September 1. Record the adjusting entry on December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 25 December, 02:19
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    1. Record the adjusting entry on December 31

    Dr. Cr.

    Rent Expense $12,000

    Prepaid Rent $12,000

    Explanation:

    Rent received in advance = $36,000

    Expense accrued = 36,000 x (4/12) = $12,000

    On December 31 the accrued expense of $ 12,000 is recorded, and adjusting entry will be posted with debit rent expense and credit prepaid rent accounts. Which will record the expense for 4 months and reduce the prepaid rent as 4 months have been passed.
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