Question

due to the terms of its lease, hawke services, inc., pays the rent for its new office space in one annual payment of $26,800 on august 1, 2024. the lease covers the period of august 1, 2024, through july 31, 2025. hawke services has a year - end of december 31. assume that hawke services had no other prepaid rent transactions, nor did it have a prepaid rent beginning balance in 2024. give the journal entries that hawke services would make for (a) the annual rent payment of $26,800 on august 1 and (b) the adjusting entry for rent expense on december 31, 2024. what is the balance of prepaid rent at december 31, 2024? give the journal entries that hawke services would make for (a) the annual rent payment of $26,800 on august 1 and (b) the adjusting entry for rent expense on december 31, 2024. what is the balance of prepaid rent at december 31, 2024? (record debits first, then credits. exclude explanations from any journal entries.) give the journal entry that hawke services would make for (a) the annual rent payment of $26,800 on august 1. date accounts debit credit august 1

Explanation:

Step1: Record initial payment

On August 1, the company pays rent in advance. Debit Prepaid Rent (an asset) and credit Cash.

Date	Accounts	Debit	Credit
	Cash		$26,800

Step2: Calculate rent expense for 2024

The lease is for 12 months from August 1, 2024 - July 31, 2025. For 2024, from August 1 - December 31 is 5 months. Monthly rent = $\frac{26800}{12}\approx2233.33$. Rent expense for 5 months = $2233.33\times5 = 11166.65\approx11167$.

Step3: Make adjusting entry

On December 31, 2024, debit Rent Expense and credit Prepaid Rent for the used - up portion of the prepaid rent.

Date	Accounts	Debit	Credit
	Prepaid Rent		$11,167$

Step4: Calculate prepaid rent balance

Prepaid Rent balance = Initial prepaid rent - Rent expense recognized. Prepaid Rent balance = $26800 - 11167=15633$.

Answer:

Date	Accounts	Debit	Credit
	Cash		$26,800$
December 31	Rent Expense	$11,167$
	Prepaid Rent		$11,167$

Prepaid Rent balance at December 31, 2024: $15,633$