Alex Company rents space to a tenant for $2,200 per month. The tenant currently owes two months rent, November and December. The tenant has agreed to pay the November, December, and January rents in full on January 15 and has agreed not to fall behind again. The adjusting entry needed on December 31 is:
A) Debit Rent Receivable, $6,600; credit Rent Earned, $6,600.
B) Debit Unearned Rent, $4,400; credit Rent Earned, $4,400.
C) Debit Unearned Rent, $2,200; credit Rent Earned, $2,200.
D) Debit Rent Receivable, $4,400; credit Rent Earned, $4,400.
E) Debit Rent Receivable, $2,200; credit Rent Earned, $2,200.

Question

Quizplus · Accepted Answer

Since the tenant has agreed to pay the November, December, and January rents in full on January 15, and will not fall behind again, on December 31, rent has been earned for the months of November and December, but not yet collected. Therefore, the adjusting entry needed is to debit Rent Receivable (the amount owed by the tenant for the November and December rent) for $4,400 and credit Rent Earned for $4,400. Option D is the only choice that reflects this adjustment.

Alex Company Rents Space to a Tenant for $2,200 Per