Action Real Estate received a check for $24,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $24,000. Financial statements will be prepared on July 31. Action Real Estate should make the following adjusting entry on July 31:
A) Debit Unearned Rent Revenue, $4,000; Credit Rent Revenue, $4,000.
B) Debit Rent Revenue, $4,000; Credit Unearned Rent Revenue, $4,000.
C) Debit Unearned Rent Revenue, $24,000; Credit Rent Revenue, $24,000.
D) Debit Cash, $24,000; Credit Rent Revenue, $24,000.

Question

Quizplus · Accepted Answer

The adjusting entry recognizes one month's rent revenue earned from the advance payment. $24,000 for 6 months means $4,000 per month. Therefore, debit Unearned Rent Revenue and credit Rent Revenue for $4,000.

Action Real Estate Received a Check for $24,000 on July