A St. Cloud contractor paid $36,000 for 6 months of yard rent in advance. After 4 months have been used, how much rent expense should be recognized?
Correct Answer
C) $24,000
Rent expense is the monthly prepaid amount multiplied by months used.
Why This Is the Correct Answer
Rent expense is the monthly prepaid amount multiplied by months used.
Why the Other Options Are Wrong
Option A: $12,000
$12,000 is below the supported result for prepaid rent adjustment; it likely uses the wrong base, period, or account bucket.
Option B: $6,000
$6,000 is below the supported result for prepaid rent adjustment; it likely uses the wrong base, period, or account bucket.
Option D: $36,000
$36,000 is above the supported result for prepaid rent adjustment; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Expense and monthly live in different drawers; Bookkeeper Posts tells which opens.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Adjusting Entries, Prepaid Expenses; use the job ledger figures in the stem and recompute the same accounting measure.
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