Dental Solutions leased a building for 2 years,effective May 1,20X3.The lease was considered an operating lease.The lease required that Dental Solutions make payments of $6,000 every 3 months,beginning on May 1,20X3.The first payment covers the period of May 1,20X3 through July 31,20X3.Assume an interest rate of 12%.What is the journal entry to be made by Dental Solutions on May 31,20X3?

A) $\begin{array}{lcc}
\text { Rent Expense } & 2,000 & \
\text { Prepaid Rent } & & 2,000 \
\end{array}$

B)$\begin{array}{lccc}
\text { Rent Expense } & 2,000 & \
\quad \text { Cash } & & 2,000 \
\end{array}$

C)$\begin{array}{lccc}
\text { Rent Expense } & 4,000 & \
\text { Prepaid Rent } & & 4,000 \
\end{array}$

D)$\begin{array}{lccc}
\text { Prepaid Rent } & 2,000 & \
\quad \text { Rent Expense } & & 2,000 \
\end{array}$

E) $\begin{array}{lccc}
\text { Prepaid Rent } & 4,000 & \
\text { Rent Expense } & & 4,000
\end{array}$

Question

Dental Solutions leased a building for 2 years,effective May 1,20X3.The lease was considered an operating lease.The lease required that Dental Solutions make payments of $6,000 every 3 months,beginning on May 1,20X3.The first payment covers the period of May 1,20X3 through July 31,20X3.Assume an interest rate of 12%.What is the journal entry to be made by Dental Solutions on May 31,20X3?

A) $\begin{array}{lcc}
\text { Rent Expense } & 2,000 & \
\text { Prepaid Rent } & & 2,000 \
\end{array}$

B)$\begin{array}{lccc}
\text {  Rent Expense } & 2,000 & \
\quad \text { Cash } & & 2,000 \
\end{array}$

C)$\begin{array}{lccc}
\text {  Rent Expense } & 4,000 & \
\text { Prepaid Rent } & & 4,000 \
\end{array}$

D)$\begin{array}{lccc}
\text {  Prepaid Rent } & 2,000 & \
\quad \text { Rent Expense } & & 2,000 \
\end{array}$

E) $\begin{array}{lccc}
\text { Prepaid Rent } & 4,000 & \
\text { Rent Expense } & & 4,000
\end{array}$

Quizplus · Accepted Answer

The payment of $6,000 covers a 3-month period, so the monthly rent expense is $2,000 ($6,000 / 3 months). On May 31, 20X3, one month has passed, so $2,000 is recognized as Rent Expense for May, and $4,000 ($6,000 - $2,000) remains as Prepaid Rent for the future months (June and July).

Dental Solutions Leased a Building for 2 Years,effective May 1,20X3 Rent Expense 2,000 Prepaid Rent 2,000\begin{array}{lcc}\text { Rent Expense } & 2,000 & \\\text { Prepaid Rent } & & 2,000 \\\end{array} Rent Expense Prepaid Rent ​2,000​2,000​

Dental Solutions Leased a Building for 2 Years,effective May 1,20X3 $\begin{array}{lcc}\text { Rent Expense } & 2,000 & \\\text { Prepaid Rent } & & 2,000 \\\end{array}$