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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Rent revenue collected 1 month in advance should be accounted for as:

  1. a. revenue in the month collected
  2. b. a current liability for deferred revenue
  3. c. a separate item in shareholders’ equity
  4. d. an accrued liability

To determine

Identify the option that should be accounted for rent revenue collected one month in advance.

Explanation

Justification for the incorrect options of a:

Revenue collected one month in advance is not accounted as revenue collected for the month. Therefore, it is an incorrect option.

Justification for the incorrect option of c:

Revenue collected one month in advance is not accounted as a separate item in shareholders’ equity. Therefore, it is an incorrect option.

Justification for the incorrect option of d:

Revenue collected one month in advance is not accounted as an accrued liability...

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