Question

11. ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2004. This other company paid the entire rent of $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year- end on December 31, 2004 would include: A) A debit to Rent Earned for $2,400. B) A credit to Unearned Rent for $2,400. C) A debit to Cash for $6,400. D) A credit to Rent Earned for $2,400. E) A debit to Unearned Rent for $4,000.

Answer 1

Answer and Explanation:

The journal entry is shown below:

Unearned revenue Dr ($6,400 × 3 months ÷ 8 months) $2,400

To revenue $2,400

(Being unearned revenue is recorded)

Here the unearned revenue is debited as it decreased the liabilities and revenue is credited as it increased the revenue

The same would be relevant