Question

On December 1, 2010, B Company received $3,600 from S Company for rent of an office owned by B Company. The $3,600 is for the period from December 1, 2010 through March 31, 2011. B Company recorded this as Unearned Rent Revenue when it was received on December 1. The adjusting entry on December 31, 2010 would include__________

Answer 1

The adjusting entry on December 31, 2010 would include recognizing a portion of the rent revenue as earned by debiting the Unearned Rent Revenue account and crediting the Rent Revenue account for one month's worth of rent.

Step-by-step explanation:

The adjusting entry on December 31, 2010 would include recognizing a portion of the rent revenue as earned. Since the $3,600 represents the rent for the period from December 1, 2010 through March 31, 2011 (4 months), one month's worth of rent would be recognized as earned on December 31, 2010.

This means that the adjusting entry on December 31, 2010 would include:

• A debit to the Unearned Rent Revenue account for the amount of one month's rent ($900).
• A credit to the Rent Revenue account for the same amount ($900).