Norma Company Lease Agreement Analysis: Prepaid Rent Balance

What is the balance of Norma Company's Prepaid Rent account at the end of June?

Norma Company signed a 12-month lease for warehouse space, with a monthly rent of $550 and 4 months paid in advance. The company recorded the payment by debiting Prepaid Rent $2,200 and crediting Cash $2,200. At the end of June, we need to determine the balance of Norma's Prepaid Rent account.

Analysis of Prepaid Rent Balance:

Given Data: - Monthly rent: $550 - Months paid in advance: 4 - Payment recorded: Prepaid Rent debited $2,200 and Cash credited $2,200 Calculation of Prepaid Rent Balance: As Norma Company paid 4 months of rent in advance, each month's rent is $550. Therefore, the total amount paid in advance is $550 * 4 = $2,200. Adjusting Entry at the end of June: 1. Debit Rent Expense: $550 2. Credit Prepaid Rent: $550 Prepaid Rent Balance Calculation: - Initial Prepaid Rent: $2,200 - June Rent Expense: ($550) - Balance at the end of June: $1,650 Therefore, the balance of Norma Company's Prepaid Rent account at the end of June is $1,650.
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