Question

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $1,100. Fragmental collected the entire $8,800 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:

a. A debit to Cash and a credit to Rent Revenue for $8,800.
b. A debit to Unearned Rent and a credit to Rent Revenue for $3,300.
c. A debit to Unearned Rent and a credit to Rent Revenue for $5,500.
d. A debit to Rent Revenue and a credit to Unearned Rent for $3,300.
e. A debit to Rent Revenue and a credit to Cash for $3,300.

Answer 1

Option B is correct one.

A debit to Unearned Rent and a credit to Rent Revenue for $3,300.

Step-by-step explanation:

The adjusting entry made by Fragmental Co. on December 31 would be: A debit to Unearned Rent and a credit to Rent Revenue for $3,300.