Question

1. ABC Company sublet a portion of its warehouse for a one-year period at an annual rental of $75,000, beginning on September 1, 2017. The tenant, XYZ company, paid the entire year's rent in advance, on September 1, 2017, which ABC recorded as a credit to Rent Revenue. Provide the adjusting entry on December 31, 2017 for ABC Company.

Answer 1

Answer and Explanation:

The adjusting entry is given below:

On Dec 31,2017

Unearned Rent Revenue $25,000 ($75,000 × 4 months ÷ 12 months)

To Rent Revenue $25,000

(Being revenue earned is recorded)

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