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1. Certainly! It looks like you’re working on understanding how to record the payment of rent for the current month along with prepaid rent for the next two months. Let’s break it down step by step using the scenario you provided.

   Scenario

   On May 1st, you paid:
   – $1,500 for the current month’s rent
   – $3,000 as prepaid rent for the next two subsequent months ($1,500 * 2 months)

   Journal Entry Components

   1. Current Month’s Rent Payment:
   2. Debit: Rent Expense (to record the expense for the current month)

   3. Credit: Cash (to record the outflow of cash)

   4. Prepaid Rent Payment:

   5. Debit: Prepaid Rent (an asset account, since this is an advance payment covering future rental periods)
   6. Credit: Cash (to record the outflow of cash for the prepaid rent)

   Full Journal Entry

   Here’s how you would record the entire transaction in journal entry format:

   | Date | Account | Debit | Credit |
   |————|—————-|——–|——–|
   | May 1st | Rent Expense | $1,500 | |
   | | Prepaid Rent | $3,000 | |
   | | Cash | | $4,500 |

   Explanation

   • Rent Expense ($1,500 Debit): This amount represents the rent cost for the current month. Since it’s an expense incurred during the period, it’s recorded as a debit to Rent Expense.
   • Prepaid Rent ($3,000 Debit): This is an asset account that reflects amounts paid in advance. Since this rent pertains to future periods, it’s recorded as a debit to Prepaid Rent.
   • Cash ($4,500 Credit): Total cash paid on May 1st is $4,500, consisting of $1,500 for the current month’s rent and $3,000 for the prepaid rent.

   Clarifying Further Use of Prepaid Rent

   Going forward, at the end of each month, you will adjust the Prepaid Rent balance. For example, at the end of May, you would make an adjusting entry to move $1,500 from Prepaid Rent to Rent Expense to account for the rent for June:

   | Date | Account | Debit | Credit |
   |————|—————-|——–|——–|
   | May

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