EBB Group (EBB), headquartered in Switzerland, is one of the world’s largest engineering companies. EBB applies U.S. GAAP, and reports its results in millions of U.S. dollars. Based on EBB’s financial reports for Year 7, at January 1, Year 7, EBB reported a balance in its Prepaid Rent account of $247 million; assume that this amount reflects its prepayments of rent on factory and office space for the next month. Assume also that on January 31, Year 7, EBB paid $3,200 million as the annual rent for the period from February 1, Year 7, to January 31, Year 8. EBB has a calendar year reporting period.
a. Provide the journal entries that EBB Group would make during January Year 7 that affect the Prepaid Rent account.
b. Provide the journal entry that EBB Group would make at the end of Year 7 that affects the Prepaid Rent account.