Question

For each separate case below, follow the three-step process for adjusting the accrued revenue account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Assume no other adjusting entries are made during the year a. Unearned Rent Revenue. The Krug Company collected 516,200 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months' rent in advance and occupancy began November 1 Debitor Credit? 16,200 Credit Unearned rent revenue 16,200 Step 1: Determine what the current account balance equals $ Step 2: Determine what the current account balance should equal Step 3. Record the December 31 adjusting entry to get from step 1 to step 2 Unearned rent revenue Rent revenue b. Unearned Services Revenue. The company charges $160 per month to spray a house for insects. A customer paid 5640 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At And the m anner that has

Answer 1

(a) Debit or Credit? $ 16,200.00 Credit Unearned rent revenue $ 13,500.00 Step 1: Determine what the current Account balance equals Step 2: Determine what the current Account balance should equals $ 13,500.00 Credit Step 3: Record the December 31 adjusting entry to get from Step 1 to Step 2 $ 2,700.00 $ 2,700.00 Unearned Rent Revenue Rent Revenue Working Notes: Rent for 12 months = $16,200 Rent for 1 month = $16,200 / 12 i.e. $1,350 Unearned Rent Revenue = $1,350 * 10 months i.e. $13,500 (b) Debit or Credit? Unearned service revenue 640.00 Credit $ 160.00 Step 1: Determine what the current Account balance equals $ Step 2: Determine what the current Account balance should equals $ 160.00 Credit Step 3: Record the December 31 adjusting entry to get from Step 1 to Step 2 $ 480.00 $ 480.00 Unearned Service Revenue Service Revenue Working Notes: Revenue for 4 treatments = $640 Revenue for 1 treatment = $160 Treatments remaining at the end of the year = 1 treatment Unearned Service Revenue at the end of the year = $160 * 1 treatment i.e. $160

Debit or Credit? $ 44,400.00 Credit Unearned rent revenue $ 14,800.00 Step 1: Determine what the current Account balance equals Step 2: Determine what the current Account balance should equals $ 14,800.00 Credit Step 3: Record the December 31 adjusting entry to get from Step 1 to Step 2 $ 29,600.00 $ 29,600.00 Unearned Rent Revenue Rent Revenue Working Notes: Rent for 6 months = $44,400 Rent for 1 month = $7,400 Unexpired lease period at the end of the month - 2 months Unearned rent revenue at the end of the year = $7,400 * 2 months = $14,800