A company paid for 9 months of rent on July 1st and the total. What would the adjusted trial balance show for the balance of prepaid rent?
Understand the Problem
The question involves a scenario where a company has paid for 9 months of rent upfront on July 1st and asks for the adjusted trial balance related to the balance of prepaid rent. To solve this, we'll need to calculate the monthly rent expense and determine how much of the prepaid rent remains after adjusting for the usage of the rent over the period.
Answer
$20,000 prepaid rent balance.
The adjusted trial balance would show $20,000 as the balance of prepaid rent on December 31st.
Answer for screen readers
The adjusted trial balance would show $20,000 as the balance of prepaid rent on December 31st.
More Information
The company initially paid for 9 months of rent on July 1st. This amount covers July through March. By December 31st, 6 months of rent have been used up (July through December), leaving 3 months of prepaid rent for January to March.
Tips
A common mistake is failing to account for the passage of time properly, leading to incorrect adjustment calculations.
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