Tim received $3,000 in advance for renting part of his building for 4 months. What is the entry to record the adjustment after one month has passed?

Question

Quizplus · Accepted Answer

The correct entry to record the adjustment after one month has passed involves recognizing the rent that has now been earned. Since Tim received the rent in advance, it was initially recorded as a liability (Unearned Rent Revenue). After one month, a portion of this liability has been earned, so the entry is to decrease the liability (Debit Unearned Rent) and increase Rental Income (credit Rental Income) to reflect the earning of the rent.

Tim Received $3,000 in Advance for Renting Part of His