Final answer:
Before adjustment, the Rent Expense on the unadjusted trial balance at December 31, 2021, would be $0. This is because the prepaid rent is initially recorded as an asset, and only after the year-end adjustment is made, the Rent Expense would show $18,000, representing one year of the three-year prepaid rent.
Step-by-step explanation:
At the beginning of 2021, a company prepaid three years of rent totaling $54,000. Since rent is an expense that needs to be recognized in the period it is used, an adjusting entry is required at the end of the accounting period. Before adjustment, the Rent Expense account on the unadjusted trial balance would show a $0 balance because the payment was initially recorded as a Prepaid Rent asset.
In order to calculate the Rent Expense for the year, we would take the total amount of $54,000 and divide it by the number of years prepaid, which is 3, to determine the annual expense. That gives us $54,000 ÷ 3 = $18,000 per year. Since the company adjusts its accounts annually and the service period is one year, the Rent Expense for the year 2021 would be $18,000 after the adjusting entry, but remember this amount is not reflected in the Rent Expense on the unadjusted trial balance, which remains at $0 until the adjustment is made.