Question

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $975. Fragmental collected the entire $7,800 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:

Answer 1

Answer:

Debit to Unearned Rent

Credit to Rent Earned for $2,925

Explanation:

Given:

Amount of total rent = $7,800

Computation:

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

Amount unearned = 7,800 [3/8]

Amount unearned = $2,925

Journal entry:

Unearned rent A/c Dr $2,925

Rent A/c Cr                   $2,925

[Debit to Unearned Rent

Credit to Rent Earned for $2,925]