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 Rent Revenue. On December 31, 20X3, you discover the following adjusting entry: Rent Revenue 32,000 Unearned Rent 32,000 To correct this error you must: debit Rent Revenue for $8,000; credit Unearned Rent for $8,000 debit Rent Revenue for $16,000; credit Unearned Rent for $16,000 debit Unearned Rent for $8,000; credit Rent Revenue for $8,000 debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

Explanation / Answer

The correct adjusting entry should have been Rent Revenue 24,000 Unearned Rent 24,000 The error correcting entry will be debit Unearned Rent for $8,000; credit Rent Revenue for $8,000

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