Somerset Leasing received $12,000 for 24 months' rent in advance. How should Somerset record this transaction?

Name: Somerset Leasing received $12,000 for 24 months' rent in advance. How should Somerset record this transaction?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The transaction should be recorded as a liability because the company has received payment for a service that has not yet been provided. The journal entry would be a debit to Cash for $12,000 and a credit to Unearned Rent Revenue for $12,000, which is option B.

Somerset Leasing Received $12,000 for 24 Months' Rent in Advance