Question

Blossom Company received a check for $28320 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 $28320. Financial statements will be prepared on July 31.

Prepare Blossom's adjusting entry on July 31.

Answer 1

Initially:

Dr cash $28,320

Cr unearned revenue $28,320

Adjusting entries:

Dr unearned revenue $4720

Cr rent revenue $4720

Step-by-step explanation:

Upon receipt of the check for $28,320 ,Blossom Company's accountant would be debit cash for $28,320 and credit unearned revenue with the same amount.

On 31st July,when financial statements are being prepared,the appropriate accounting would be recognized rent revenue for 1 month from 1 July to 31st July,by debiting unearned revenue with $4720 ($28,320*1/6) and credit same amount to rent revenue account.