Answer:
c. understated.
Explanation:
Unearned rent usually comes to bear where cash or other forms of consideration has been received in advance for rental income.
When this happens, the entries to be posted are a debit to cash account and a credit to unearned rent.
When the rent is earned during the year, the entries will be a debit to unearned rent (balance sheet item) and a credit to rent revenue( in the p/l).
The recognition of the rent revenue results in an increase in net income.
As such, if unadjusted, rent revenue and net income would be understated.
Option c.
