Question

Mouse Inc. received a $2,500 prepayment of rent from one of its tenants and immediately credited the Rent revenue account. By the end of the period, $500 of the rent had not been earned by Mouse Inc.. Demonstrate the required adjustment needed at the end of the period.A. Credit Rent revenue $500. B. Credit Unearned rent for $2,000. C. A Debit Rent revenue for $500. D. Credit Rent revenue $2,000.

Answer 1

C. A Debit Rent revenue for $500.

Step-by-step explanation:

The journal entry for receiving cash in advance is shown below:

Cash Dr $2,500

To Unearned rent revenue $2,500

(Being the advance cash collected)

But for recognize the revenue, i.e earned from rent, the entry is

Rent revenue Dr $500

To unearned rent revenue $500

(Being the unearned rent revenue is recorded)

Hence, the correct option is C.