Question

On September 1 of Year 1, the company received $3,600 cash for rent in advance. This...

On September 1 of Year 1, the company received $3,600 cash for rent in advance. This $3,600 rental receipt covers the period from September 1 of Year 1 to August 31 of Year 2. On September 1, the receipt of the cash was recorded as a liability, Unearned Rent. Which ONE of the following would be included in the ADJUSTING journal entry necessary on December 31 with respect to this rent received in advance?

Group of answer choices

CREDIT to Rent Revenue for $3,600

DEBIT to Rent Revenue for $3,600

DEBIT to Rent Revenue for $2,400

DEBIT to Rent Revenue for $1,200

CREDIT to Rent Revenue for $1,200

CREDIT to Rent Revenue for $2,400

Business   Accounting   
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Answer #1

Answer:

Unearned rent means the rent received in advance, however, the related benefit is not yet provided. Rent received in advance related to future period & still to be earned the rent income.

Adjusting journal entries for Rent Received in advance are as follows:

ii) Unearned Rent Account (Debit) $1,200

To Rent Received Account (Credit) $1,200

($3,600 x 4/12)

Hence, credit to rent revenue for $1,200 is the correct answer i.e. need to be recognized in the books of account.

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