Question

Lopez Company received $6,400 on April 1, 2010 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2010 adjusting entry isa. debit Rent Revenue and credit Unearned Rent, $1,600.b. debit Rent Revenue and credit Unearned Rent, $4,800.c. debit Unearned Rent and credit Rent Revenue, $1,600.d. debit Unearned Rent and credit Rent Revenue, $4,800.

Answer 1

Answer:

Correct option is Statement a.

Dr. Rent Revenue = $1,600

Cr. Unearned Rent = $1,600

Explanation:

Provided information rent received for 1 year = $6,400

Date of receiving Rent = April 1, 2010

Since rent is for 1 year the period is from 1 April to 31 March of next year.

Thus, rent for current year 2010 = $6,400 \times \frac{9}{12} = 4,800$

Unearned rent for current year = $6,400 - $4,800 = $1,600

Therefore, on December 31 the adjusting entry will be:

Dr. Rent Revenue = $1,600

Cr. Unearned Rent = $1,600

Correct option is Statement a.