On october 1, goodwell company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. the cash receipt 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:

Question

Caroline West

Business

28 March, 19:22

On october 1, goodwell company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. the cash receipt 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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Richard Shaffer · Answer 1

Goodwell will recognize 3 months (Oct 1 - Dec 31) of rent revenue earned, and will reduce (debit) the unearned rent revenue for those 3 months.

2,500 x 3 months = 7,500

Journal Entry, Dec 31:

Unearned Rent Revenue: 7,500

Rent Revenue: 7,500

The new Unearned Rent Revenue Account balance will be:

12,500 - 7,500 = 5,000