On September 30, 2020, Sarah Chen Corporation paid $36,000 for rent on her storefront retail location for the year beginning October 1, 2020. Chen reports on a calendar-year basis.

Scenario i:

On September 30, 2020, when recording the rent payment, Chen made the following journal entry:

Prepaid rent 36,000

Cash 36,000

Required:

1. Provide the journal entry (if any) that Chen would have to make on December 31, 2020 to correctly reflect the rent on the 2020 income statement and balance sheet.

Scenario ii:

On September 30, 2020, when recording the rent payment, Chen made the following journal entry:

Rent expense 36,000

Cash 36,000

Required:

2. Provide the journal entry (if any) that Chen would have to make on December 31, 2020 to correctly reflect the rent on the 2020 income statement and balance sheet.

Scenario iii:

On September 30, 2020, when recording the rent payment, Chen made the following journal entry:

Rent expense 6,000

Prepaid rent 30,000

Cash 36,000

Required:

3. Provide the journal entry (if any) that Chen would have to make on December 31, 2020 to correctly reflect the rent on the 2020 income statement and balance sheet.

4. What amount will Chen show in their income statement for 2020 related to this rent transaction under each of the three scenarios? Briefly comment on/explain your answer.

5. What amount will Chen show in their balance sheet as of December 31, 2020 related to this rent transaction under each of the three scenarios? Briefly comment on/explain your answer.