On November 1, 20X3, your calendar year company receives $40,000 for space it is

Question

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as a liability. On December 31, 20X3, you discover that an adjusting entry was never made. To correct this error you must: debit Rent Revenue for $16,000; credit Unearned Rent for $16,000 debit Rent Revenue for $24,000; credit Unearned Rent for $24,000 wait until the end of the 5-month period debit Unearned Rent for $24,000; credit Rent Revenue for $24,000 debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

Explanation / Answer

Rent revenue has to be recognized for 2 months debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

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