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14 February, 17:10

On November 1, 2019, Peaches Consulting Service paid $4,800 for 12 months of advance rent on its office space. The correct adjusting entry on December 31, 2019, to show the amount of rent that had expired would include:

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  1. 14 February, 20:01
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    Debit Rent expense $800

    Credit Prepaid rent $800

    Explanation:

    When rent is paid in advance, an asset is reduced while another is increased. The entries required are debit to prepaid rent and a credit to cash account. As the rent expires, the expense is recognized by debiting rent expense and crediting prepaid rents.

    Rent expense as at 31 December 2019

    = 2/12 * $4,800

    = $800
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