g On July 1 the Swifty Corporation paid $18240 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Swifty Corporation is:

The adjusting entry to be made by the Swifty Corporation is:

Rent Expense $3,040 (debit)

Prepaid Rent $3,040 (credit)

Explanation:

On the day the cash was paid, the entries will be:

Prepaid Rent $18240 (debit)

Cash $18240 (credit)

On the day the financial statements are prepared, rent for one month would have expired, the adjusting entries will be:

Rent Expense $3,040 (debit)

Prepaid Rent $3,040 (credit)

Conclusion:

We are recognizing an Expense; Rent Expense and de-recognizing an Asset : Rent Prepaid.