On January 2, Dog Mart prepaid $18,480 rent for the year and recorded the prepayment in an asset account. Prepare the January 31 adjusting entry for rent expense.

The January 31 adjusting entry for rent expense:

Debit Rent expense $1,540

Credit Prepaid rent $1,540

Explanation:

On January 2, Dog Mart prepaid $18,480 rent for the year. Dog Mart recorded the entry:

Debit Prepaid rent $18,480

Credit Cash $18,480

Rent expense per month of the year:

$18,480/12 = $1,540

On January 31, the last day of the following 1 month, the company records an adjusting entry:

Debit Rent expense $1,540

Credit Prepaid rent $1,540