Adjusting Entries Practice Problem Prepaid Rent Expense

 

Required:	Write the adjusting journal entry for the month ended September 30 based on the following information:
	Building rent was paid on September 1 for 6 months in advance. This amount was recorded as Prepaid Building Rent.
Solution:	Purpose: To adjust prepaid building rent
	Accounts:	Balance Sheet:        Prepaid Building Rent
		Income statement:   Building Rent Expense
	Calculation:	The period from September 1 to September 30 is 1 month.
		Building Rent Expense = ( $5,400 / 6 months ) = $900 per month Prepaid Building Rent = ( $5,400 / 6 months ) x 5 month  = $4,500
		Desired balance in Prepaid Building Rent	$  4,500
		- Current balance in Prepaid Building Rent	( 5,400)
		Needed reduction of Prepaid Building Rent	$ (900)

	Date	Account Titles	Debits	Credits
	Sept. 30	Building Rent Expense	$900
		Prepaid Building Rent		900
		To record the prepaid building rent that has expired..

 

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