A four-month rent prepayment of $14,400 was recorded as an asset. After one month expires, what rent expense should be recognized?
Correct Answer
D) $3,600
One month of a four-month prepayment is one fourth of $14,400.
Why This Is the Correct Answer
One month of a four-month prepayment is one fourth of $14,400.
Why the Other Options Are Wrong
Option A: $2,400
$2,400 is below the supported result for prepaid rent adjustment; it likely uses the wrong base, period, or account bucket.
Option B: $3,000
$3,000 is below the supported result for prepaid rent adjustment; it likely uses the wrong base, period, or account bucket.
Option C: $3,200
$3,200 is below the supported result for prepaid rent adjustment; it likely uses the wrong base, period, or account bucket.
Memory Technique
Month and four-month live in different drawers; Office Prepares tells which opens.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Recording Before the Event, Prepaid Expenses; use the job ledger figures in the stem and recompute the same accounting measure.
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