In: Accounting
Medina rents a portion of its parking lot to the neighboring business under a long-term lease agreement that requires payment of rent 6 months in advance on April 1 and October 1 of each year. The October 1, 2019, payment was made and recorded as prepaid rent. Indicate whether or not this item requires an adjusting entry at December 31, 2019, and if does, indicate which accounts are increased by the adjustment and which are decreased.
Accounts title |
Debit |
Credit |
Rent Expenses |
$ XXX |
|
Prepaid Rent |
$ XXX |
|
(rent expired for 3 months) |
‘Prepaid Rent’ being an Asset account, is credited. This will be lead to a DECREASE.
Account to be Increased = Rent Expenses
Account to be decreased = Prepaid Rent.