Saturn Co. rented out office space to a tenant on January 1 and received a total of $90,000 for the first nine months of rent. The amount was recorded as Rent Collected in Advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment at March 31 have on Saturn's net income for the quarter ending March 31?

Question

Quizplus · Accepted Answer

The adjustment at March 31 recognizes three months of rent as earned revenue, which is $30,000 ($90,000/9 months * 3 months), increasing net income by this amount.

Saturn Co Rented Out Office Space to a Tenant on January