Answer:
1.
Debit Credit
Prepaid Rent $22,800
Cash $22,800
2.
Debit Credit
Rent expense(22,800*3/12) $5,700
Prepaid Rent $5,700
3.
Prepaid rent=22,800-5,700=$17,100
Rent expense=$5,700
Explanation:
1.
On October 1, , the following journal entry will be recorded in respect of the advance rent paid by the Hoosiers for one year of rent space at local mall:
Debit Credit
Prepaid Rent $22,800
Cash $22,800
2.
The year end given in this question is December 31 and the prepaid rent is paid for one year and since the rent is paid on October 1, therefore, only expense in respect of 3 months i.e. from October to the December will be recognised in this year in respect of rent expense. Remaining expense of nine months will be recognised in the next year.
The following adjusting Journal entry will be recorded in respect of rent expense in accounts on December 31.
Debit Credit
Rent expense(22,800*3/12) $5,700
Prepaid Rent $5,700
3. The year end adjusting balance of prepaid rent and rent expense will be calculated as
Prepaid rent=22,800-5,700=$17,100
Rent expense=$5,700
Journal entry refers to the primary record of transactions and events of a specific period. The journal entries for the question are given in the attachment.
Journal entry refers to the primary record of transactions and event of an entity in chronological order during a specific period. Journal entry supports the preparation of subsidiary books.
Prepaid expense refers to the expenses paid in advance for a period. They appear in the balance sheet as assets of the entity.
Prepaid rent of Suppose Hoosiers is $22,800 in the month of October. In the month of December, the expense of 3 months will be recognized as the expense for the period.
Therefore rent expense will be:
[tex]\rm Rent\:expense = Rent\:per\:month \times 3\: months\\\\\rm Rent\:expense = \$1,900 \times 3\: months\\\\\rm Rent\:expense = \$5,700[/tex]
The prepaid rent will be the rent paid for next year for the period between January to September:
[tex]\rm Prepaid\:rent = \$1,900 \times 9\:months\\\\\rm Prepaid\:rent = \$17,100[/tex]
Prepaid rent of $17,100 will appear in the asset side of the balance sheet.
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