The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to
debit Prepaid Rent, $7,000; credit Rent Expense, $7,000.
debit Prepaid Rent, $14,000; credit Rent Expense, $14,000.
debit Rent Expense, $7,000; credit Prepaid Rent, $7,000.
debit Rent Expense, $14,000; credit Prepaid Rent $14,000.