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
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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
Yes, you should since you have paid for something.
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
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.
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