Question

Business collected S6,600 rent in advance on July 1. Accountant record the journal entry for this collected amount on July 1. This rent is for one year. On December 31, business earned rent for 6 months from July to December. The amount of rent earned for six month is computed below:
Prepaid Rent for 6 months= Total prepaid rent/ Duration of rent
= $6,600/12 *6
= $3,300

So, rent earned by the business is $3,300.
Adjusting entry on December 31 is recorded as shown below:

Date Particulars Debit Credit
Dec.31 Unearned Revenue $3,300
Rent Revenue $3,300
(To record rent revenue earned that was collected in advance.)

Answer 1

Answer:

This is correct

Explanation:

There will be two entries. One at the time of receiving cash on 1st July . That would be

Cash. B. $6600 (debit)

Unearned Rent Revenue. $ 6600 (credit)

On 31st Dec an adjusting entry would be made . The rent for 6 months will be calculated which will be as given above.

Rent for 6 months = ( 6,600/12 )* 6= $ 3,300

The entry will be

Unearned Rent Revenue $3,300 (debit)

Rent Revenue $ 3,300 (credit)

$ 3300 will be deducted from the current liabilities on the credit side.

Rent Revenue of $3300 will be added on the credit side of the income statement.