Question

Fragment Company leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $825. Fragment collected the entire $6,600 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made on December 31 would be: Multiple Choice A debit to Unearned Revenue and a credit to Rent Revenue for $2,475. A debit to Rent Revenue and a credit to Cash for $2,475. A debit to Rent Revenue and a credit to Unearned Revenue for $2,475. A debit to Cash and a credit to Rent Revenue for $6,600. A debit to Unearned Revenue and a credit to Rent Revenue for $4,125.

Answer 1

The adjusting entry made on December 31 by Fragment company would be:  A debit to Unearned Revenue and a credit to Rent Revenue for $2,475.

What is revenue?

Revenue is income earned by an individual or a business from the sale of any products or services offered. It is the value of all sales of goods and services recognized by a company in a period.

Amount unearned = Amount of total rent (3months / 8 months)

Amount unearned = 6,600 [3/8]

Amount unearned = $2,475

Journal entry:

Unearned rent A/c Dr $2,475

Rent A/c Cr                  $2,475

[Debit to Unearned Rent

Credit to Rent Earned for $2,475]

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