On December 1, ABC Apartment Company received $4,800 in advance from a tenant for 3 months' rent, December through February. It credited Unearned Rent Revenue for the full amount. After the adjusting entry is recorded, the Unearned revenue balance at December 31 equals
Blank
______.

Question

On December 1, ABC Apartment Company received $4,800 in advance from a tenant for 3 months' rent, December through February. It credited Unearned Rent Revenue for the full amount. After the adjusting entry is recorded, the Unearned revenue balance at December 31 equals 
Blank
______.

BlackTom AI · Accepted Answer

Rent revenue is recognized as it is earned over the three-month period. Calculate the monthly rent and then adjust the unearned liability for the portion earned by December 31.

1. Relevant concepts
- Unearned Rent Revenue is a liability account representing cash received before services (occupancy) are provided.
- Revenue recognition: Earned revenue is recognized as the tenant occupies the apartment each month.
- Adjusting entry at period end reduces the liability and records revenue for the earned portion.

2. Step-by-step reasoning and calculations
- Total cash received on December 1 = $4,800 for three months (December, January, February).
- Monthly rent = $4,800 ÷ 3 = $1,600 per month.
- Amount earned by December 31 = one month’s rent = $1,600.

3. Adjusting journal entry at December 31 (showing intermediate steps)
- Debit Unearned Rent Revenue (liability) $1,600 to reduce the liability.
- Credit Rent Revenue (revenue) $1,600 to recognize earned revenue.
- Unearned Rent Revenue after adjustment = original balance $4,800 − $1,600 (recognized) = $3,200.

4. Why the correct answer is $3,200
- Because one of the three months has been earned by December 31, only two months’ rent remain unearned: $1,600 × 2 = $3,200. The adjusting entry transfers the earned $1,600 from liability to revenue, leaving $3,200 as the remaining liability.

5. Why other choices are incorrect
- $4,800: This is the unadjusted balance immediately after receipt; it ignores the December month earned and thus fails to record the required adjusting entry.
- $5,000: Not possible given the $4,800 total received.
- $1,600: This is the amount earned (and moved to Rent Revenue), not the remaining unearned balance.

Conclusion: After the adjusting entry, the Unearned Rent Revenue balance at December 31 is $3,200, matching the provided correct answer.

On December 1, ABC Apartment Company received $4,800 in advance from a tenant for 3 months' rent, December through February. It credited Unearned Rent Revenue for the full amount. After the adjusting entry is recorded, the Unearned revenue balance at December 31 equals Blank ______.Single choice

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