Patterson Realty Company received a cheque for $21,000 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 $21,000. Financial statements will be prepared on July 31. Patterson Realty should make the following adjusting entry on July 31
A) debit Unearned Rent Revenue, $3,500; credit Rent Revenue, $3,500.
B) debit Rent Revenue, $3,500; credit Unearned Rent Revenue, $3,500.
C) debit Unearned Rent Revenue, $21,000; credit Rent Revenue, $21,000.
D) debit Cash, $21,000; credit Rent Revenue, $21,000.

Question

Quizplus · Accepted Answer

The $21,000 received is for 6 months, so one month's rent is $3,500 ($21,000 / 6). On July 31, one month has passed, so $3,500 of the Unearned Rent Revenue should be recognized as Rent Revenue.

Patterson Realty Company Received a Cheque for $21,000 on July