Final answer:
By the end of the year, Perry Company would recognize $7,000 as rent revenue and after adjusting entries, there would be $14,000 remaining in the Deferred Rent Revenue account.
Step-by-step explanation:
The Perry Company received $21,000 for six months of rent in advance on November 1. We must calculate the rent revenue recognized by the end of the year and the balance in the Deferred Rent Revenue account after adjusting entries.
Calculation of Rent Revenue by the End of the Year:
Since the rent covers six months and was received in advance on November 1, two months of rent would apply to the current year (November and December). To calculate the monthly rent, we divide the total payment by the number of months:
$21,000 / 6 months = $3,500 per month
Therefore, the rent revenue recognized by year-end is $3,500 per month for two months, which is:
$3,500 * 2 months = $7,000
Deferred Rent Revenue by the End of the Year:
After recognizing two months of rent revenue, four months remain unearned. The remaining balance in the Deferred Rent Revenue account is the prepaid rent for those four months:
$3,500 * 4 months = $14,000