December 1, Smiles, Inc. prepays $2,400 for three months of rent. On December 31, Smiles prepares financial statements. After the appropriate adjusting entry for rent, Smiles’ balance sheet would show: a. prepaid Rent of $2,400.
b. rent Expense of $800.
c. prepaid Rent of $1,600.
d. prepaid Rent of $800.

c. prepaid Rent of $1,600.

Explanation:

Based on the information given we were told that the company prepays the amount of $2,400 for three months of rent which means that After the appropriate adjusting entry for rent, Smiles’ balance sheet would show: PREPAID RENT OF $1,600.

Prepaid Rent of $1,600

[$2,400-(2,400/3)]

=$2,400-$800

=$1,600