Garcia Corporation received cash of $18,000 on August 1, 2010 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2010 adjusting entry is

a. debit Rent Revenue and credit Unearned Rent, $7,500.
b. debit Rent Revenue and credit Unearned Rent, $10,500.
c. debit Unearned Rent and credit Rent Revenue, $7,500.
d. debit Cash and credit Unearned Rent, $10,500.

B.) debit Rent Revenue and credit unearned rent $10,500

To determine the correct December 31, 2010 adjusting entry, we need to understand the concept of unearned rent revenue.

Unearned rent revenue refers to the amount of rent received in advance by a company but not yet earned. When rent is received in advance, it is recorded as a liability (unearned rent) because the company has an obligation to provide the goods or services (in this case, use of property for rent) in the future.

In this scenario, Garcia Corporation received cash of $18,000 for one year's rent in advance on August 1, 2010. This means that $18,000 of rent revenue was received upfront but has not yet been earned as of December 31, 2010.

To adjust this entry on December 31, 2010, we need to recognize the portion of the rent that has been earned during the period from August 1 to December 31. Since the rent was for one full year, the period from August 1 to December 31 represents five months (5/12 of a year).

Therefore, the correct adjusting entry on December 31, 2010 would be:
Debit: Unearned Rent ($18,000 x 5/12) = $7,500
Credit: Rent Revenue ($18,000 x 5/12) = $7,500

Hence, the correct answer is option (c): debit Unearned Rent and credit Rent Revenue, $7,500.