Answer :
To correct unearned rent revenue error in 2021, debit Retained Earnings by $93,000. This adjusts income and equity, ensuring accuracy in financial statements by aligning revenue recognition appropriately. The correct answer is b. Debit to Retained Earnings for 93,000.
To correct an error in the recognition of unearned rent revenue in 2021, the journal entry would involve: b. Debit to Retained Earnings for 93,000. This correction entry adjusts the Retained Earnings account to reflect the impact of the error on the company's financial position. Since the unearned rent revenue was incorrectly recognized as revenue, it would have led to an overstatement of income and equity.
By debiting Retained Earnings, the entry reduces the balance in this account, reflecting the decrease in equity due to the error. This adjustment ensures the accuracy of the financial statements by properly aligning the income with the period in which it was earned.
The correct answer is b. Debit to Retained Earnings for 93,000.
The correct journal entry to rectify the error recorded in 2021 would be option (b) Debit to Retained Earnings for 93,000. The correct option is b.
This correction aims to adjust the error made in the previous year's financial statements. Since the error resulted in an overstatement of Retained Earnings by 93,000, the correction requires a decrease in Retained Earnings. In accounting, to decrease an account, we use a debit entry. Therefore, a Debit to Retained Earnings for 93,000 is necessary to reverse the overstatement. Options (a), (c), and (d) do not accurately reflect the nature of the error or the corrective action needed.
By debiting Retained Earnings, we reduce its balance, reflecting the correction of the overstatement caused by the erroneous entry. This adjustment ensures that the financial statements accurately represent the company's financial position and performance. Rectifying errors promptly is essential for maintaining the integrity and reliability of financial reporting, ensuring stakeholders have access to accurate information for decision-making purposes. Therefore, selecting option (b) aligns with accounting principles and practices, effectively addressing the error identified in the journal entry. The correct option is b.
