Janno Enterprises prepaid four months of office rent totaling $9,000 on October 1, 2019. The rent period begins on October 1. Assuming Janno records deferred expenses using the alternative treatment, what would be the adjusting entry recorded on December 31, 2019? Select one: A. No entry is needed since Rent Expense was recorded on October 1, 2019. B. Debit Prepaid Rent and credit Rent Expense for $27,000.00. C. Debit Prepaid Rent and credit Rent Expense for $2,250.00. D. Debit Rent Expense and credit Prepaid Rent for $6,750.00.

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Business

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17 August, 08:50

Janno Enterprises prepaid four months of office rent totaling $9,000 on October 1, 2019. The rent period begins on October 1. Assuming Janno records deferred expenses using the alternative treatment, what would be the adjusting entry recorded on December 31, 2019? Select one: A. No entry is needed since Rent Expense was recorded on October 1, 2019. B. Debit Prepaid Rent and credit Rent Expense for $27,000.00. C. Debit Prepaid Rent and credit Rent Expense for $2,250.00. D. Debit Rent Expense and credit Prepaid Rent for $6,750.00.

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Ronald Spencer · Answer 1

The correct option is D, debit Rent Expense and credit Prepaid Rent for $6,750.00

Explanation:

At the date the office rent was prepaid, the cash account would have been debited with $9,000 and the rent prepaid would have been debited with the same amount pending when the expense is actually incurred.

However, at year end three months of rent expense have been incurred, hence an adjustment is required to record three months rent in the books of account as follows:

$9000*3/4=$6,750

Dr Rent expense $6,750

Cr Rent prepaid $6,750