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31 March, 01:49

Prepaid Rent. On September 1 of the current year, the company prepaid $44,400 for two years of rent for facilities being occupied that day. The company debited Prepaid Rent and credited Cash for $44,400. Prepaid Rent

Step 1: Determine what the current account balance equals.

Step 2: Determine what the current account balance should equal.

Step 3: Record the December 31 adjusting entry to get from step 1 to step 2

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  1. 31 March, 03:15
    0
    The computation is shown below:

    a. The current account balance equal to $44,400

    b. The current account balance equal to

    Since the company prepaid rent for two years is $44,400 but we have to compute four four months i. e from September 1 to December 31

    We assume the books are closed on December 31

    So, the current account balance is

    = $44,400 - $7,400

    = $37,000

    The $7,400 is come from

    = $44,400 * 4 months : 24 months

    = $7,400

    c. And, the adjusting entry is

    Rent expense A/c Dr $7,400

    To Prepaid rent A/c $7,400

    (Being rent expense is recorded)
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