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On November 1, 20X7, XYZ Co. prepaid rent for $60,000 for the next 12 months (from...

On November 1, 20X7, XYZ Co. prepaid rent for $60,000 for the next 12 months (from November 1, 20X7 through October 31, 20X8), recording the entire rental payment as prepaid rent on the November 1, 20X7 payment date. If adjusting entries are made monthly, what adjusting journal entry is needed on December 31, 20X7?

please show work and thank you for help

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Answer #1

On November 1, 2017 Entry for Prepaid Rent:

Prepaid Rent Account Dr. $60000

Bank/Cash Account Cr $60000

(Being Rent paid for the entire year Noember 2017 to October 2018)

In the Secnd case:

Here we need to transfer the Rent amount of that particular month during the month end . And Rent for the month is

$60000/12 months= $5000 per month. Every month we need to transfer $5000 each to Rent Account from Prepaid Rent Account.  

Hence entry on 31st December 2017 will be:

Rent Account Dr. $ 5000

Prepaid Rent Account Cr. $5000

(Being Rent for the month of December 2017 transferred from Prepaid Rent Account to Rent Account)

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