Question

Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements are prepared on December 31. The appropriate adjusting journal entry to make on December 31 of the first year would be:_______

Answer 1

Answer:

The adjusting entry will be made as below;

Explanation:

The entry made on October 1,

Bank    Dr.$30,000

Unearned revenue   Cr.$30,000    

The adjusting entry on December 31 will be;

Unearned Revenue (30,000/12)*2      Dr.$5,000

Rental Income                                      Cr.$5,000                  

Answer 2

Answer:

$7500

Explanation:

On December 31, Unearned rent revenue from October 1 to December 31 will be credited to rent revenue and will be Debited to unearned rent revenue.

Unearned rent revenue to be debited on December 31 = $30,000 *3/12 = $7,500

Hence appropriate journal entry would be:

Unearned Rent Revenue Dr $7,500

To rent Revenue $7,500