Green Realty Company received a check for $24000 on July 1 which represents a 6-month advance payment of rent on a building it rents to a client.Unearned Rent Revenue was increased for the full $24000.Financial statements will be prepared on July 31.Green Realty should make the following adjustment on July 31:

Question

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The 6-month advance payment of rent covers the period from July 1 to December 31. As of July 31, only one month (July) has passed, so only 1/6th of the payment should be recognized as revenue. Therefore, Unearned Rent Revenue should be decreased by $4000 (1/6th of $24000) and Rent Revenue should be increased by $4000.

Green Realty Company Received a Check for $24000 on July