Question

Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one yearadvance payment of rent on an office it rents to a client. Unearned Rental Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entryto make on December 31 would be

A.Rent Revenue $2,500Unearned Rent Revenue $2,500
B.Rent Revenue $22,500Unearned Rent Revenue $22,500
C.Unearned Rent Revenue $22,500Rent Revenue $22,500
D.Unearned Rent Revenue $7,500Rent Revenue $7,500

Answer 1

D. Unearned Rent Revenue $7,500 Rent Revenue $7,500

Step-by-step explanation:

The journal entry is shown below:

Unearned Rent Revenue Dr $7,500

To Rent Revenue $7,500

(Being the unearned rent revenue is recorded)

The computation is shown below:

= Unearned rent revenue × (number of months ÷ total number of months in a year)

= $30,000 × (3 months ÷ 12 months)

= $7,500

Since the unearned rent revenue is credited for $30,000 but for adjusting for 3 months we have to debit this account and credited the rent revenue account