ABC Rentals collects rent from several properties. Prior to recording adjusting entries, assume the rent income account has a credit balance of $4 000. Two adjustments are to be made at the end of the financial year:
(1) an accrual for accrued rent income of $800; and
(2) the unearned rent income account is to be decreased by $200.
After processing these adjusting entries the amount of rent income to be shown in the income statement is:
A) $5 000.
B) $4 600.
C) $3 400.
D) $3 000.

Question

Quizplus · Accepted Answer

The rent income will increase by $800 due to the accrual for accrued rent income, making it $4,800. Then, decreasing the unearned rent income account by $200 effectively recognizes that amount as earned, thus further increasing the rent income to be reported to $5,000.

ABC Rentals Collects Rent from Several Properties