The CHS Company paid $60,000 cash to its landlord on November 1, 2019 for rent covering...
The CHS Company paid $60,000 cash to its landlord on November 1, 2019 for rent covering the six-month period from November 1, 2019 through April 30, 2020. The books are adjusted only at year-end. Which of the following does not correctly describe the effect on CHS Company's financial statements of the December 31, 2019 adjusting entry?
Multiple Choice
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Rent expense increases $20,000.
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Stockholders' equity increases $20,000.
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Prepaid rent decreases $20,000.
Homework Answers
The entry would be
| Rent expense (increase) | 20,000 | |
| Prepaid rent (60,000*2/6) (Decrease) | 20,000 |
Option B is the answer (Stockholder's Equity increases $20,000)
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