On July 1 2011 the Pepper Diner rented out part of its property and collected $9000 in advance for a nine-month period.The receipt was credited to a liability account.At 31 December 2011,Pepper Diner's year-end,which of the following adjusting journal entries should be made?

Question

Quizplus · Accepted Answer

Since the advance rent was credited to a liability account, it means that the revenue has not yet been earned. Therefore, at the end of the year, an adjusting entry is required to recognize the revenue that has been earned during the period. The adjusting entry should debit the liability account (Unearned Rent Income) and credit the revenue account (Rent Income). Hence, choice C is the correct answer.

A is incorrect because it suggests recording $6000 as Rent Income without recognizing the unearned revenue.

B is incorrect because it suggests recording an equal amount of $3000 to both Rent Income and Unearned Rent Income, which doesn't make sense.

D is incorrect because Rent Receivable is not relevant to this situation since the rent has already been paid in advance.

On July 1 2011 the Pepper Diner Rented Out Part