Addon Corporation paid cash of $24,000 on June 1, 2016 for one year’s rent in ad

Question

Addon Corporation paid cash of $24,000 on June 1, 2016 for one year’s rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2016 adjusting entry is

debit Prepaid Rent and credit Rent Expense, $12,000.

debit Prepaid Rent and credit Rent Expense, $14,000.

debit Rent Expense and credit Prepaid Rent, $14,000.

debit Rent Expense and credit Prepaid Rent, $12,000.

debit Prepaid Rent and credit Rent Expense, $12,000.

debit Prepaid Rent and credit Rent Expense, $14,000.

debit Rent Expense and credit Prepaid Rent, $14,000.

debit Rent Expense and credit Prepaid Rent, $12,000.

Explanation / Answer

Solution:

The answer to the above question is -

Debit Rent Expense and Credit Prepaid Rent $ 12,000

This can be explained as -

On payment of Prepaid Rent Jun-01 Prepaid Rent 24,000 Cash 24,000 Adjusting Entry Dec-31 Rent Expense 24,000 / 12 months * 6 months 12,000 Prepaid Rent 12,000

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