Hobbs Company started the year with $6,000 of prepaid rent. Hobbs paid additional rent in advance amounting the $12,000. The rent expense for the year was $15,000. What was the balance in prepaid rent on the year-end balance sheet?
To determine the balance in prepaid rent on the year-end balance sheet, we need to calculate the net change in prepaid rent during the year.
First, we start with the beginning balance of prepaid rent, which is $6,000.
Next, we add the additional rent paid in advance during the year, which amounts to $12,000.
Therefore, the total prepaid rent available for the year is $6,000 + $12,000 = $18,000.
Now, we subtract the rent expense for the year, which is $15,000.
The net change in prepaid rent during the year is $18,000 - $15,000 = $3,000.
Therefore, the balance in prepaid rent on the year-end balance sheet is $3,000.