Question

Unearned (deferred) revenues adjustments LO P2 Record adjusting journal entries for each of the following for year ended December 31. Assume no other adjusting entries are made during the year. a. Unearned Rent Revenue. The Krug Company collected $10,800 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months' rent in advance and occupancy began November 1. b. Unearned Services Revenue. The company charges $115 per insect treatment. A customer paid $460 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied three treatments for the customer. c. Unearned Rent Revenue. On September 1, a client paid the company $33,600 cash for six months of rent in advance (the client leased a building and took occupancy immediately). The company recorded the cash as Unearned Rent Revenue. The Krug Company collected $10,800 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months' rent in adyance and occupancy began November 1. Note: Enter debits before credits. The company charges $115 per insect treatment. A customer paid $460 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied three treatments for the customer.On September 1, a client paid the company $33,600 cash for six months of rent in advance (the client leased a building and took occupancy Immediately). The company recorded the cash as Unearned Rent Revenue.

Answer 1

Answer:

The Krug Company

Adjusting Journal Entries for the year ended December 31:

1.a. Debit Unearned Rent Revenue $1,733

Credit Rent Revenue $1,733

To recognize rent revenue earned for 2 months.

1.b. Debit Unearned Services Revenue $345

Credit Services Revenue $345

To recognize services revenue earned for 3 treatments.

1.c. Debit Unearned Revenue $22,400

Credit Rent Revenue $22,400

To recognize rent earned for 4 months.

Explanation:

a) Earned Rent Revenue = $1,733 ($10,800/12 * 2)

b) Earned Service Revenue = $115 x 3 = $345

c) Earned Rent Revenue = $22,400 ($33,600/6 * 4)

d) Adjusting journal entries are entries made at the end of an accounting period to recognize some accrued expenses and revenue, including depreciation in accordance with the accrual concept and the matching principles of generally accepted accounting principles.  The accrual concept requires that the accrual basis is used in accounting for revenue and expenses and not the cash basis.  Transactions are recognized in the period they occur and not based on when cash is exchanged.