Question

For each of the following journal entries 1through 12,enter the letter of the explanation that most closelydescribes it in the space beside each entry. (You can use letters more than once.)

A. To record payment of a prepaid expense.

B. To record this period’s use of a prepaid expense.

C. To record this period’s depreciation expense.

D. To record receipt of unearned revenue.

E. To record this period’s earning of prior

unearned revenue.

F. To record an accrued expense.

G. To record payment of an accrued expense.

H. To record an accrued revenue.

I. To record receipt of accrued revenue.

______ 1. Interest Receivable 3,500

Interest Revenue . 3,500

______ 2. Salaries Payable . 9,000

Cash . 9,000

______ 3. Depreciation Expense 8,000

Accumulated Depreciation . 8,000

______ 4. Cash 9,000

Unearned Professional Fees 9,000

______ 5. Insurance Expense . 4,000

Prepaid Insurance . 4,000

______ 6. Interest Expense 5,000

Interest Payable 5,000

______ 7. Cash 1,500

Accounts Receivable (from services) . 1,500

______ 8. Salaries Expense 7,000

Salaries Payable 7,000

______ 9. Cash 1,000

Interest Receivable . 1,000

______ 10. Prepaid Rent . 3,000

Cash . 3,000

______ 11. Rent Expense 7,500

Prepaid Rent 7,500

______ 12. Unearned Professional Fees . 6,000

Professional Fees Earned . 6,000

Short answer

Option B is correct.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of prepaid expense

The prepaid rent is the current asset which are not consumed by the company.

Adjustment entry

The given adjustment entry passed to record the use of the prepaid expense of the current period because prepaid rent is credited with $7,500.