Question

On June 1, 2019, an advance rent payment of $8,400, representing a four-month prepayment for the months of June, July, August, and September, was received in cash from the company’s tenant. The journal entry to record the effects of the four months of rent collected in advance on June 1, 2019 is:

A. Dr.Cash 8,400 /Cr.Rent Revenue 8,400
B. Dr.Cash 8,400/ Cr.Unearned Rent Revenue 8,400
C. Dr.Unearned Rent Revenue 6,300/ Cr.Rent Revenue 6,300
D. Dr.Unearned Rent Revenue 2,100 /Cr.Rent Revenue 2,100

Answer 1

B. Dr.Cash 8,400/ Cr.Unearned Rent Revenue 8,400

Step-by-step explanation:

The payment received will increase the cash account by $8400 and we will debit the Cash account by $8400. The rent is received on 1 June 2019 and is for the 4 months starting from June. On 1 June, the rent is still unearned and will be recorded as earned or Rent revenue when the month of June ends. So, right now, the total amount of the rent received in advance is unearned and the entry on 1 June 2019 will be,

1 June 2019 Cash $8400 Dr

Unearned Rent revenue $8400 Cr