Panda Corporation paid cash of $7470 on the last day of the 7th month of 2014...

Panda Corporation paid cash of $7470 on the last day of the 7th month of 2014 for two year’s rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2014 the adjusting entry should accomplish a reduction in assets of how much?

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Expert Solution

Rent from 7th month of 2014 to 12th month (December) of 2014 = 6 months

Rent Paid = $ 7470 for 2 years = $ 7470 for 24 months

Rent for 7th month of 2014 to 12th month of 2014 = 7470 * 6 / 24

= $ 1867.50

The December 31, 2014 the adjusting entry should accomplish a reduction in assets of $ 1867.50

THerefore, entry should be

Rent Expense..............Dr 1867.50

Prepaid Rent .............Cr 1867.50

ekkarill92 answered 8 months ago

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