Pay $3000 toward lease agreement for office. The agreement is for 1year. The rent is 1,500 per month, last months rent was required at time of lease agreement. Lease period is effective July 1st 2014 through jun 30th 2015.
I think it's like this:
Rent expense 1,500.00
Prepaid rent 1,500.00
How do I add the cash?
Would the 3,00.00 be another entry on its own?
Like cash 3,000.00
And rent 3,000.00
To record the payment of $3,000 towards the lease agreement, you will need to make the following journal entries:
1. First, record the initial transaction when the lease agreement was signed. Since the last month's rent was required at the time of lease agreement, you would have recorded this as a prepaid rent entry:
Dr Prepaid Rent: $1,500.00
Cr Cash/Bank: $1,500.00
2. Now, to record the $3,000 payment towards the lease agreement, you will need to make a separate entry:
Dr Rent Expense: $1,500.00 (This represents the payment for two months)
Dr Prepaid Rent: $1,500.00 (This will reduce the remaining prepaid rent balance)
Cr Cash/Bank: $3,000.00
Here's how the final journal entries should look like:
Entry 1 (Lease Agreement):
Dr Prepaid Rent: $1,500.00
Cr Cash/Bank: $1,500.00
Entry 2 (Payment towards lease agreement):
Dr Rent Expense: $1,500.00
Dr Prepaid Rent: $1,500.00
Cr Cash/Bank: $3,000.00
This way, you are recognizing the expense of $1,500 for the current month and adjusting the prepaid rent account accordingly.