On December 31, Jacoby Company's Prepaid Rent account had a balance before adjustment of $6,000. Three months' rent was paid in advance on December 1, the first day of the lease term. The adjusting entry needed on December 31 is:
A. Debit Rent Expense $6,000; credit Accounts Payable $6,000.
B. Debit Rent Expense $2,000; credit Accounts Payable $2,000.
C. Debit Prepaid Rent $6,000; credit Cash $6,000.
D. Debit Cash $2,000; credit Prepaid Rent $2,000.
E. Debit Rent Expense $2,000; credit Prepaid Rent $2,000.
Answer: E
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