Answer:
Credit input of $11,000 to Expense Account to reduce the expense account for year 1 to its right figure of $1,000
Explanation:
Step 1: Since the payment was made on November 1st, this means that by 31st December the end of the year 1 period, Thomasson had already paid two months for the present or current period (that is from November 1st to December 31st).
This means out of the 2 years (24 months) paid, 2 months rent have enjoyed while 22 months remaining will go into prepayments (asset yet to be enjoyed).
Step 2: Since, all were recorded as rent expense initially, the correction is that only two months worth will be rent expense, while 22 months will go to prepaid rent account.
2 months rent (2/22) x 12,000= $1,000
22 months prepayment (22/22)x 12,000= $11,000
Therefore, to reverse the error of debiting the expense account with the entire $12,000,Year 1 expense account will be credited by the prepaid rent of $11,000. This will bring the rent expense for the first year back to its right figure of $1,000
