Final answer:
One year's rent, amounting to $18,000, is recognized as an expense, and the remaining prepaid rent on the adjusted trial balance as of December 31, 2021, would be $36,000.
Step-by-step explanation:
The question pertains to the accounting treatment of prepaid rent in a company's financial statements. As the company prepaid three years' worth of rent on January 1, 2021, amounting to $54,000, we need to recognize one year's worth of that rent as an expense by the end of that same year. The adjusting entry on December 31, 2021, would therefore move one year's worth of rent from the asset account (Prepaid Rent) to an expense account (Rent Expense).
To calculate the amount for Prepaid Rent that will appear on the adjusted trial balance at December 31, 2021, we divide the total payment by the number of years to find the annual expense, which is $54,000 / 3 = $18,000. Since one year has passed, we will recognize $18,000 as Rent Expense and reduce the Prepaid Rent by this amount. Thus, the Prepaid Rent on the adjusted trial balance would be $54,000 - $18,000 = $36,000.