If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 of that year should be $1,500.
$18,000 * 1/12 = $1,500

Question

Quizplus · Accepted Answer

The adjusting entry on December 31 will be a debit to Rent Expense for $16,500 and a credit to Prepaid Rent for $16,500. This will reduce the balance in Prepaid Rent to $1,500.

If a Company Reporting on a Calendar Year Basis, Paid