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Adjustment for unearned revenue On June 1, 20Y2, Herbal Co. received $18,900 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 20Y2.
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Adjustment for unearned revenue
On June 1, 20Y2, Herbal Co. received $18,900 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 20Y2.
Prepare the adjusting entry to record the earned amount of unearned rent on December 31, 20Y2.
Explanation of Solution
Adjusting Entries
Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle, and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.
Prepare the adjusting entry to record the earned amount of unearned rent on December 31, 20Y2.
| Date | Account Titles and Explanation | Debit ($) | Credit ($) |
| December 31, 20Y2 | Unearned Rent | 11,025 | |
| Rent Revenue | 11,025 | ||
| (To record the revenue earned for 7 month ) |
Table (1)
- Unearned Rent is a liability, and it is decreased by $11,025. Hence, debit unearned rent by $11,025.
- Rent revenue is a component of Stockholders ‘equity, and it is increased by $11,025. So, credit rent revenue by $11,025.
Working Note:
Calculate the amount of rent revenue...
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