3. Accrual Accounting Concepts
Introduction to Adjusting Journal Entries and Prepaid Expenses
Multiple Choice
Multiple ChoiceOn January 1, a company signed a two-year rental agreement policy at $4,800 per year in cash. At this time, the company included the payment of the lease in Rent Expense. The lease began immediately. The adjusting entry necessary when preparing the June 30 financial statements would include:
A
Debit Prepaid Rent $2,400; Credit Rent Expense $2,400
B
Debit Rent Expense $2,400; Credit Prepaid Rent $2,400
C
Debit Prepaid Rent $7,200; Credit Rent Expense $7,200
D
Debit Rent Expense $7,200; Credit Prepaid Rent $7,200
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