Question

On January 10, 2016, Jeanco paid $2,100 rent for a storage facility for the period from January 10 through May 31. The rent charge is $450 per month.

Use the horizontal model, or write the journal entry, to show the effect of:

a. The January 10, 2016 rent payment assuming that the disbursement was recorded as an expense.

b. The January 31, 2016 adjustment recorded to show the appropriate amount of expense in the income statement of Jeanco for the month of January.

c. Show an alternative way of recording the disbursement of $2,100 on January 10, 2016.

d. Record the adjustment that would be appropriate at January 31, 2016 if the disbursement had been recorded as in c.

e. What is the effect of the difference between the two methods of recording these items (a and b versus c and d) on the: 1. Income statement for the month of January? 2. Balance sheet at January 31?

Answer 1

Solution:

Journal Enteries Entries
Part	Date	Particulars	Debit	Credit
a	10-Jan-16	Rent A/c Dr	$2,100.00
		To Cash A/c		$2,100.00
		(Being Rent paid from 10.01.2016 to 31.05.2016)
b	31-Jan-16	Prepaid Rent A/c Dr	$1,800.00
		To Rent A/c		$1,800.00
		(Being Adjustment entry for rent to be regonized in next financial year)
c	10-Jan-16	Prepaid Rent A/c Dr	$2,100.00
		To Cash A/c		$2,100.00
		(Being Rent paid from 10.01.2016 to 31.05.2016)
d	31-Jan-16	Rent A/c Dr	$300.00
		To Prepaid Rent A/c		$300.00
		(Being Adjustment entry for rent to be regonized in current year)