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Gates Accounting Services (GAS), a sole proprietorship, entered into a new 18-month office space contract on September 15, Year 1, paying the full $36,000 rent contract to the real estate company on that day (lease expiration March 15,

/in /by

Gates Accounting Services (GAS), a sole proprietorship, entered into a new 18-month office space contract on

September 15, Year 1, paying the full $36,000 rent contract to the real estate company on that day (lease expiration March 15, Year 3). Assuming that GAS reports on a calendar year-end and that journal entries are posted on a quarterly basis (only), what adjusting journal entry (if any) would be made to the prepaid rent account prior to closing the December 31, Year 1, financial statements?A.

Debit prepaid rent $8,000.B.

Credit prepaid rent $6,000.C.

Credit prepaid rent $7,000.D.

No adjusting entry made.

 
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