If a Company Reporting on a Calendar Year Basis, Paid

question 141

True/False

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance (lease beginning January 1), and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.

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Definitions:

DSO Analysis

Stands for Days Sales Outstanding, a calculation used to assess the average number of days it takes a company to collect payment after a sale has been made.

Seasonal Changes

Variations in business or economic activity that occur within specific seasons or periods of the year, often predictable and recurring.

Working Capital Management

The management of a company's short-term assets and liabilities to ensure it has adequate funds to continue its operations and avoid financial distress.

Current Assets

Current assets are assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle, whichever is longer.