Final answer:
The rent received by the leasing company in December for the January period should be reported as prepaid revenue for January 2016, following the accrual basis of accounting.
Step-by-step explanation:
If an apartment leasing company receives the rent for January 2016 from a tenant in December 2015, this transaction would be reported by the leasing company as prepaid revenue for January 2016. This is because in accounting, revenue is recognized in the period in which it is earned, according to the accrual basis of accounting. Therefore, even though the payment is received in December 2015, it is not considered revenue for December as the rental period it covers is January 2016. By recognizing it as prepaid revenue, the leasing company acknowledges that it has received payment for services that it has yet to render.
The termination clause provided does not impact the revenue recognition but ensures that both parties understand the process of terminating the leasing agreement. It outlines the conditions such as the 30-day written notice and the return of property conditions.