Question

on June 1, 2018, Herbal co. received $40,460 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 2018. Round your answers to the nearest dollar amount.

Answer 1

The entry recognized in the books as at June 1, 2018, is as follows:
AJE:_____
Dr. Cash $40,460
Cr. Rental Income $40,460
To record payment of rental from customer

However, since portion only is realized as at December 31, 2018, thus, adjusting journal entry should be made to adjust the unearned portion.

AJE:___
Dr. Rental Income $16,858
Cr. Unearned Rental Income $16,858
To adjust unearned rental income of 5 months

The unearned rental income is presented under Accounts Payable portion of the books.