On December 16, 2012, Keen Company received $5,400 from Smith Company for rent on an office building owned by Keen. The $1,800 covers the period December 16, 2012, through February 15, 2013. If Keen Company credited Unearned Rent to record the $5,400 rent collected on December 16, the adjusting entry needed on December 31, 2012, would include

Question

Quizplus · Accepted Answer

The rent for the period from December 16 to December 31 is earned and should be recognized as revenue. This period is 15 days, so the earned rent is ($5,400 / 60 days) * 15 days = $1,350. Therefore, the adjusting entry would include a credit to Rent Revenue of $1,350.

On December 16, 2012, Keen Company Received $5,400 from Smith