Question

On January 1, 2018, Wellburn Corporation leased an asset from Tabitha Company. The asset originally cost Tabitha $300,000. The lease agreement is an operating lease that calls for four annual payments beginning on January 1, 2018, in the amount of $36,000. The other three remaining payments will be made on January 1 of each subsequent year. Which of the following journal entries should Tabitha record on January 1, 2018? Multiple Choice a. Cash 36,000 Lease receivable 36,000 b. Cash 36,000 Deferred rent revenue 36,000 c. Cash 36,000 Rent revenue 36,000 d. Cash 36,000 Rent expense 36,000

Answer 1

Answer:

Correct option is B

Explanation:

Cash 36,000

Deferred rent revenue 36,000

Deferred income is, in accrual accounting, money earned for goods or services which have not yet been delivered. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue.