Murphy company sublet a portion of its warehouse for five years at an annual rental of $60,000, beginning on may 1, 2014. the tenant, sheri charter, paid one year's rent in advance, which murphy recorded as a credit to unearned rent revenue. murphy reports on a calendar-year basis. the adjustment on december 31, 2014 for murphy should be

adjusting entry:

unearned rent revenue 40,000 debit

 rent revenue  40,000 credit

to record accrued rent revenue

Explanation:

contract value for 1 year 60,000

1 month of rent   60,000/ 12 = 5,000

How many month past from May to december?

months through may to december 8 months

value of 8 month of rent= 40,000

this will be the earned portion of the contract

balance unearned rent revenue at year end:

60,000 - 40,000 = 20,000

https://www.ntia.doc.gov/page/chapter-1-theory-markets-and-privacy