Question

On December 1, Jordan Company received $3,000 December, January, and February rent from their renters. Jordan Company initially records all rent payments received as an unearned rent. The unearned or deferred rent needs an adjusting entry on December 31st. Which is the appropriate adjusting entry?

Answer 1

The appropriate adjusting entry for unearned rent on December 31st is to record the portion of rent that has been earned during the month. The adjusting entry would be a debit to Unearned Rent and a credit to Rent Revenue.

Step-by-step explanation:

The appropriate adjusting entry for unearned rent on December 31st is to record the portion of rent that has been earned during the month. In this case, Jordan Company received $3,000 for rent from their renters for December, January, and February. On December 31st, since only one month has passed (December), the company needs to adjust their books to reflect the earned portion of the rent for that month.

The adjusting entry would be:

1. Debit Unearned Rent (a liability account) for $1,000
2. Credit Rent Revenue (an income account) for $1,000

This entry records $1,000 as income for the month of December since only one-third of the total received rent has been earned at that time.