Antel is a tenet of Baber.On July 1,Antel paid Baber $1200 for 3 months of rent.On July 31,Baber's adjusting entries will include a debit to:

Question

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When Antel paid $1200 for 3 months of rent, it was recorded as Unearned Revenue for Baber since they had not yet earned the revenue (rent) for those three months.

At the end of the month, Baber will need to adjust their accounts to reflect the amount they have actually earned. Since one month has passed, Baber will have earned 1/3 of the rent, or $400.

Therefore, the adjusting entry will be a debit to Unearned Revenue for $400 (to reflect the amount that has been earned), and a credit to Rent Revenue for $400 (to show that revenue has been earned and should be recognized).

Option A is incorrect because Baber is not taking the whole $1200 as rent revenue, as they have only earned $400 so far.

Option B is incorrect because Baber has already received the cash payment from Antel, so there is no need to debit cash again.

Option D is incorrect because Baber did not pay $400 for rent expense, they received $1200 in unearned revenue which is being recognized over the 3 months.

Antel Is a Tenet of Baber