Question

On January 1st 2020, Century Inc. paid rent company $48,000 for 2 years’ worth of rent...

On January 1st 2020, Century Inc. paid rent company $48,000 for 2 years’ worth of rent in advance. Century Inc. prepares quarterly financial statements at the end of every March, June, September, and December; provide the following for Century Inc.:

1) January 1st 2020 initial transactional entries

2) December 31st 2020 adjusting entries

3) If Century Inc. prepares financial statements only once a year, what would be the adjusting entries on December 31st 2020

Please explain how do you get your answers. Thanks!

Business   Accounting   
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Answer #1
Date General Journal Debit Credit
January 1st, 2020 Prepaid rent $48,000
Cash $48,000
( To record rent expense)
December 31st, 2020 Rent expense $6,000
Prepaid rent $6,000
( To record rent expense for 3 months)
December 31st, 2020 Rent expense $24,000
Prepaid rent $24,000
( To record rent expense for 12 months)

1.

Rent expense for 24 months = $48,000

2.

Rent expense for 3 months ( October 1 to December 31) = 48,000 x 3/24

= $6,000

3.

Rent expense for 12 months = 48,000 x 12/24

= $24,000

  

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