Just a review question from a study guide, but I have found out that some of the

Question

Just a review question from a study guide, but I have found out that some of the answers that were given to me were wrong, so I just want to double check to make sure I'm studying the correct information.

Along with the answer, if you could write a brief explanation as well that would be a huge help. Thanks.

16. The Harris Company purchased a computer for $4,500 on December 1. lt is estimated that annual depreciation on the computer will be $900. If financial statements are to be prepared on December 31, the company should make the following adjusting entry a. Debit Depreciation Expense, $900, Credit Accumulated Depreciation, $900 b. Debit Depreciation Expense, $75, Credit Accumulated Depreciation, $75. c. Debit Depreciation Expense, $3,600; Credit Accumulated Depreciation, $3,600. d. Debit Office Equipment, $4,500; Credit Accumulated Depreciation, $4,500

Explanation / Answer

$12,000 was paid for 6 months rent. That's $2,000 per month. Here's the initial entry made on July 1(DR = Debit, CR = Credit): DR: Prepaid Rent $12,000 CR: Cash $12,000 On July 31, one month has passed so we need to expense $2,000, or one month's worth of rent. Like so: DR: Rent Expense $2,000 CR: Prepaid Rent $2,000 The answer is c. As each month passes, we make the same entry until the Prepaid Rent is used up. Hope that helps. Please rate. Thanks.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---