Q4SE - Horngren'S Financial And Managerial Accounting

Question

Question :Suppose on January 1, Andrew’s Tavern prepaid rent of $16,800 for the full year. At November 30, how much rent expense should be recorded for the period January 1 through November 30?

Step-by-Step Solution

Answer

Answer

The rent expense equals $15,400

Step 1: Explanation of Matching Principle

Per the matching principle,

Step 2: Calculation of Rent Expense

The rent expense is calculated as follows: 

 $$\begin{gathered} \mathbf{\text{Rent expense =amount paid×}}\frac{\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{ }\mathbf{o}\mathbf{f}\mathbf{ }\mathbf{m}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{h}\mathbf{s}\mathbf{ }\mathbf{e}\mathbf{x}\mathbf{p}\mathbf{i}\mathbf{e}\mathbf{r}\mathbf{d}}{\mathbf{m}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{h}\mathbf{s}\mathbf{ }\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{ }\mathbf{y}\mathbf{e}\mathbf{a}\mathbf{r}} \\ \mathbf{\text{ =\$16,800×}}\frac{\mathbf{11}}{\mathbf{12}} \\ \mathbf{\text{ =\$15,400}} \end{gathered}$$

Thus, the rent expense is $15,400.