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18 September, 17:44

On october 1, goodwell company rented warehouse space to a tenant for $2,200 per month and received $11,000 for five months' rent in advance on that date. the collection was credited to the unearned rent account. the company's annual accounting period ends on december 31. the unearned rent account balance at the end of december, after adjustment, should be:

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  1. 18 September, 18:10
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    Unearned rent is a liability account that recognizes the rent money Goodwell has received for months that haven't happened yet (rent money hasn't been earned). After each month passes, Goodwill will debit (reduce) unearned rent by $2,200 and credit (increase) rent revenue by 2,200.

    On December 31, the company will have reduced unearned rent for 3 months (October, November, December). This will have the following effect on the account balance:

    11,000 - (2,200 * 3) = 11,000 - 6600 = 4,400

    The adjusted Unearned Rent balance at the end of December will be

    $4,400
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