Question

Novak Corp. received a check for $21960 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $21960. Financial statements will be prepared on July 31. Novak's should make the following adjusting entry on July 31: debit Rent Revenue, $3660; credit Unearned Rent Revenue, $3660. debit Unearned Rent Revenue, $3660; credit Rent Revenue, $3660. debit Unearned Rent Revenue, $21960; credit Rent Revenue, $21960. debit Cash, $21960; credit Rent Revenue, $21960.

Answer 1

Debit Unearned Rent Revenue, $3660; credit Rent Revenue, $3660

Step-by-step explanation:

Cash collected in advance results in the debit in cash account and a credit to Unearned Rent Revenue.

To recognized revenue when it is earned, the entries required are credit revenue and debit Unearned Rent Revenue with the amount earned.

Revenue earned by Novak Corp

= 1/6 × $21,960

= $3,660

Entries required are debit Unearned Rent Revenue, $3660; credit Rent Revenue, $3660