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crazyitalian143
Apr 16, 2007, 07:08 AM
On 12/31 the company signs a lease for new office space , and pays for the first three months rent (Jan-Mar) The amount is 4500.

Do I do a journal entry for that

goldenbutterfly
Apr 16, 2007, 07:24 AM
Yes, you should since you have paid for something.

crazyitalian143
Apr 16, 2007, 07:29 AM
So it would be

Cr Cash 4500
Dr Lease/note payable 4500

Or because he pays for the year

Dr New Office 13500
Cr Cash 4500
Cr note payable 9000

CaptainForest
Apr 16, 2007, 01:09 PM
The fact he signs the lease requires no JE.

The only JE would be the cash paid upfront, that is 3 months worth, a total of $4,500

Dr. Prepaid Rent 4,500
Cr. Cash 4,500

Then, after January, you will Debit Rent Expense for 1/3 of that amount and draw down your Prepaid Rent by the same amount.