On October 1, Goodwell Company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Rent account. The company's annual accounting period ends on December 31. The Unearned Rent account balance at the end of December, after adjustment, should be:
A) $5,000.
B) $10,000.
C) $7,500.
D) $12,500.
E) $2,500.

Question

Quizplus · Accepted Answer

By the end of December, three months of rent have been earned (October, November, December), totaling $7,500. Therefore, the remaining unearned rent for the next two months (January and February) is $5,000.

On October 1, Goodwell Company Rented Warehouse Space to a Tenant