On October 1, Goodwell Company rented warehouse space to a tenant for $2,300 per month and received $11,500 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:

a. $9,200.

b. $6,900.

c. $4,600.

d. $2,300.

e. $11,500.

Question

Katherine Delacruz

Business

27 September, 23:38

On October 1, Goodwell Company rented warehouse space to a tenant for $2,300 per month and received $11,500 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:

a. $9,200.

b. $6,900.

c. $4,600.

d. $2,300.

e. $11,500.

+5

Answers (1)

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Armando · Answer 1

c. $4,600

Explanation:

The computation of the adjusted unearned rent account balance is shown below:

= Advance rent received for five months - unearned rent for 3 months from October 1 to December 31

where,

Advance rent = $11,500

And, the unearned rent would be

= $2,300 * 3 month

= $6,900

Now put these values to the above formula

So, the value would be equal to

= $11,500 - $6,900

= $4,600