REM Real Estate received a check for $27,000 on July 1 which represents a 6 month

Business

1 answer:

sweet-ann [11.9K]4 years ago

5 0

Answer:

a. Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500

Explanation:

When the company receives the $27,000 check for six months of advance rent, it records the unearned revenue in a liability account named Unearned Rent Revenue. The resulting journal entry is:

(Dr) Cash, $27,000

(Cr) Unearned Rent Revenue, $27,000

With the passing of each month, the company <em>earns</em> one-sixth (1/6) of the unearned rent revenue (or $4,500), essentially reclassifying the revenue from unearned to earned. Therefore, after one month, the resulting journal entry is:

(Dr) Unearned Rent Revenue, $4,500

(Cr) Rent Revenue, $4,500

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