On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021 through December 2022. What adjusting entry should Charlie Co. record on December 31, 2021?

A) Debit Rent Expense and credit Cash for $18,000.

B) Debit Rent Expense and credit Prepaid Rent for $18,000.

C) Debit Prepaid Rent and credit Rent Expense for $6,000.

D) Debit Rent Expense and credit Prepaid Rent for $6,000.

Answer: D

Adjusting entries:

A) Often include the Cash account.

B) Usually are recorded at the beginning of the accounting period.

C) Always involve at least one income statement account and one balance sheet account.

D) Adjust the balance of revenue and expense accounts to zero.

Answer: C

The adjusting entry required to record accrued expenses includes:

A) A credit to Cash.

B) A debit to an asset.

C) A credit to an asset.

D) A credit to liability.

Answer: D