Final answer:
For the receipt of $12,000 on December 1 for 12 months' rent, the journal entry is a debit to the Cash account and a credit to the Unearned Revenue account, representing the cash received and the liability for future rental services.
Step-by-step explanation:
When a company receives $12,000 on December 1 for 12 months' rent for a warehouse, the accounting transaction needs to reflect the receipt of cash and the obligation to provide a rental space for the duration of those 12 months. This is typically treated as unearned revenue (a liability) because the service (rental of property) will be provided over time. The appropriate journal entry on December 1 would be to debit the Cash account and credit the Unearned Revenue account.
Journal Entry:
- Debit: Cash $12,000
- Credit: Unearned Revenue $12,000
This entry reflects the increase in cash and records the liability that the company has since it owes the rental service. As each month passes, one-twelfth of the unearned revenue would be recognized as earned revenue, reflecting the rental space that has been provided for that month.