Question

Fragment Company leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $1,250. Fragment collected the entire $10,000 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made on December 31 would be:

Answer 1

Given:

Credit to rent earned for

Amount of total rent = $10,000

Amount unearned = amount of total rent ( 3 month / 8 month)

`\begin{gathered} \text{Amount unearned=10000}*(3)/(8) \\ =3750 \end{gathered}`

Unearned rent is : $3750