Craig paid $900 of rent on December 1 for an entire year (12 months). So at the end of the accounting period on December 31, Craig has used 1 month of rent at $75 ($900/12 = $75 per month). The balance is Prepaid Rent Expense, an asset account with future benefit. Since Craig recorded the entire $900 as Rent Expense, an adjusting entry is needed to bring accounts up to date at December 31.

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Craig paid $900 of rent on December 1 for an entire year (12 months). So at the end of the accounting period on December 31, Craig has used 1 month of rent at $75 ($900/12 = $75 per month). The balance is Prepaid Rent Expense, an asset account with future benefit. Since Craig recorded the entire $900 as Rent Expense, an adjusting entry is needed to bring accounts up to date at December 31.

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Trial Balance and Adjustement Entries

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