Mullins Real Estate received a check for $30000 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 $30000. Financial statements will be prepared on July 31. Mullins Real Estate should make the following adjusting entry on July 31:
A) Debit Unearned Rent Revenue $5000; Credit Rent Revenue $5000.
B) Debit Rent Revenue $5000; Credit Unearned Rent Revenue $5000.
C) Debit Unearned Rent Revenue $30000; Credit Rent Revenue $30000.
D) Debit Cash $30000; Credit Rent Revenue $30000.

Question

Quizplus · Accepted Answer

The correct adjusting entry is to debit Unearned Rent Revenue and credit Rent Revenue for $5000. This reflects the recognition of one month's rent ($30,000 / 6 months = $5,000 per month) as earned revenue by July 31.

Mullins Real Estate Received a Check for $30000 on July