Question

Dress Right Clothing Corporation subleased space to a jewelry store for $500 per month. On July 16, the jewelry store paid Dress Right $1,000 in advance for the first two months' rent. By the end of July, one half of one month's rent service has been provided. What is the adjusting entry for rent revenue at the end of July?

A) Debit Unearned Rent Revenue $1,000, Credit Rent Revenue $500
B) Debit Unearned Rent Revenue $500, Credit Rent Revenue $500
C) Debit Rent Revenue $500, Credit Unearned Rent Revenue $500
D) Debit Rent Revenue $1,000, Credit Unearned Rent Revenue $1,000

Answer 1

The adjusting entry for rent revenue at the end of July would be Debit Unearned Rent Revenue $1,000, Credit Rent Revenue $500.

Step-by-step explanation:

The adjusting entry for rent revenue at the end of July would be option A) Debit Unearned Rent Revenue $1,000, Credit Rent Revenue $500.

Since the jewelry store paid $1,000 in advance for the first two months' rent, $500 should be recognized as rent revenue for the month of July. The remaining $500 represents unearned rent revenue since it has not yet been earned.

Therefore, the adjusting entry would transfer $500 from Unearned Rent Revenue to Rent Revenue, increasing the Rent Revenue by $500 and reducing the Unearned Rent Revenue by $500.