Llama Company Signed a New $36,000 Three-Year Lease Beginning October

question 95

Multiple Choice

Llama Company signed a new $36,000 three-year lease beginning October 1, Year 1, for a storage facility for holding merchandise inventory.On October 1, Year 1, Llama Company recorded the first year's payment of $12,000 in the Prepaid Rent account.There was no balance in the Prepaid Rent account prior to this entry.Llama Company records adjustments only at the calendar year end.At December 31, Year 1, the adjusting entry needed to accurately reflect the correct balances in the Prepaid Rent and Rent Expense accounts would be to debit:

• A)Prepaid Rent for $12,000 and credit Rent Expense for $12,000
• B)Rent Expense for $12,000 and credit Prepaid Rent for $12,000
• C)Prepaid Rent for $3,000 and credit Rent Expense for $3,000
• D)Rent Expense for $3,000 and credit Prepaid Rent for $3,000
• E)Prepaid Rent for $9,000 and credit Rent Expense for $9,000

Calculate and distinguish between accounting profit and economic profit.

Recognize explicit costs and their impact on a firm's financial statements.

Comprehend the relationship between economic profit, accounting profit, and normal profit.

Identify the components of total production costs from an economist's perspective.

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Definitions:

Cheese Flavoring

Substances added to cheese or cheese products to enhance or alter flavor, which can include natural enzymes, bacterial cultures, or artificial compounds.

Soybean Fermentation

A process involving the breakdown of soybeans by microorganisms or enzymes, resulting in products like soy sauce and tempeh.

Ascomycete

A member of a large group of fungi characterized by the formation of spores in special sac-like structures called asci.

Zygomycete

Members of the Zygomycota, a phylum of fungi, known for their fast-growing molds, reproductive zygosporangia, and life cycles that include both sexual and asexual reproduction.