The prepayment of rent for the next three months (not including this month):
A)reduces total assets.
B)has no effect on total assets.
C)increases expenses.
D)decreases stockholders' equity.

Question

Quizplus · Accepted Answer

An expense is recorded in the same period as the revenues to which it relates or,if it cannot be directly associated with revenues,it is recorded in the period that the underlying business activity occurs.Since this rent is not associated with generating revenue or any other business activity for this month,it is not this month's expense but rather an exchange of one asset (Cash)for another asset (Prepaid Rent).

The Prepayment of Rent for the Next Three Months (Not