On november 1, year 1, thomasson paid rent on its building for 2 years in the amount of $12,000. when the transaction was initially recorded, the full $12,000 was recorded as an expense using an alternative approach to record the prepayment. the adjusting journal entry on december 31, year 1 requires a

Credit input of $11,000 to Expense Account to reduce the expense account for year 1 to its right figure of $1,000

Explanation:

Step 1: Since the payment was made on November 1st,  this means that by 31st December the end of the year 1 period, Thomasson had already paid two months for the present or current period (that is from November 1st to December 31st).

This means out of the 2 years (24 months) paid, 2 months rent have enjoyed while 22 months remaining will go into prepayments (asset yet to be enjoyed).

Step 2: Since, all were recorded as rent expense initially, the correction is that only two months worth will be rent expense, while 22 months will go to prepaid rent account.

2 months rent (2/22) x 12,000= $1,000

22 months prepayment (22/22)x 12,000= $11,000

Therefore, to reverse the error of debiting the expense account with the entire $12,000,Year 1 expense account will be credited by the prepaid rent of $11,000. This will bring the rent expense for the first year back to its right figure of $1,000

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