The Oliver Construction Company received $18,000 for six months rental income in advance on November 1, 2015, and credited the Rental Revenue account. The required adjusting entry on December 31, 2015, would include a

Question

Quizplus · Accepted Answer

The correct adjusting entry is to debit Rental Revenue for $12,000 because two months of the rental income (November and December) have been earned by December 31, 2015, leaving four months' worth of the rental income ($12,000) unearned. This adjustment recognizes that $12,000 of the $18,000 received in advance is still unearned revenue as of December 31, 2015.

The Oliver Construction Company Received $18,000 for Six Months Rental