Final answer:
The adjusting entry required on December 31 is debit Rent Expense, $999, and credit Prepaid Rent, $999.
Step-by-step explanation:
The adjusting entry required on December 31 is debit Rent Expense, $999, and credit Prepaid Rent, $999.
Since the prepaid rent account has a balance of $11,988 representing 12 months' rent paid on December 1, the monthly rent expense is calculated by dividing the prepaid amount by the number of months, which is $999 ($11,988 / 12 months).
Therefore, on December 31, we need to reduce the prepaid rent account by $999 (debit) and record the rent expense for the month by the same amount (credit).