Question

on january 1 primo properties collected 7200 for six months rent in advance from a tenant...

on january 1 primo properties collected 7200 for six months rent in advance from a tenant renting an apartment primo prepares monthly financial statements

which of the following describes the required adjustment on january 31

a- increase cash assests, earned capital revenue (rent) and net income by 7200$

b- decrease liabillities (unearned rent) by 1200$ increase earned capital, revenue (rent) and net income by 1200$

c- increase liabilities (unearned rent revenue) by 1200$ decrease earned capital, revenue (rent) and net income by 1200$

d- increase cash assets and liabilities (unearned rent revenue) by 6000$

e- decrease cash assets and liabilities (unearned rent revenue) by 6000$

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Answer #1

Ans:b- decrease liabilities  (unearned rent) by 1200$ increase earned capital, revenue (rent) and net income by 1200$

Date Account Title and Explanation Post Ref Debit Credit
Jan-01 Cash $7200
     Unearned Rent revenue $7200
(To record the rent received in advance)
Jan-31 Unearned Rent Revenue $1200
       Rent Revenue $1200
(To record the Monthly Rental Income Earned 7200/6=1200)
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