Answered: BT21 Call Company has the following…

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

ChapterB: Bad Debts

Section: Chapter Questions

Problem 2P: Hardys Landscape Services total revenue on account for 2018 amounted to 273,205. The company, which...

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BT21 Call Company has the following selected accounts with unadjusted balances at the end of 2021 as follows:

·   Rent Revenue – P12,000

·   Unearned Rent Revenue – P6,000

Two (2) transactions were entered into by the company during the year with its operating lessors as follows:

·   Paid rent to BTS Corp, P120,000. The amount was credited to a nominal account.

·   Another rent was paid to BigHit Company, P60,000. At the end of the accounting period, it was determined that unearned rent totaled P45,000 and the auditors concur based on examination made in accordance with PFRS and PSA.

Which of the following statements is correct?

A. An adjusting entry pertaining to the above transactions would require a debit of P45,000 to rent revenue.

B. No adjustment is necessary.

C. An adjusting entry is required to increase rent revenue by P120,000.

D. An adjusting entry would require a credit to unearned rent of P39,000.

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