Question

A. On May 1st, 2019, Desert paid $180,000 in advance for 18 months rent on its new warehouse. At the time, Desert debited a Nominal Account! B. On August 1st, 2019, Desert received $120,000 cash in advance for services to be provided over the next 6 months. At the time, Desert credited a Real account, For your account titles, choose from: Unearned Une Rent Prepaid Rent Revenue Prepaid Services Revenue Rent Expense Revenue i Service Expense Revenue Unearned Service "Because Canvas is very sensitive in grading your responses, copy & paste from these account titles to ensure your answer is not counted wrong for an abbreviation or typo. The dollar amount does not need to include a dollar sign or comma. AJE for Transaction A: Date Account Title Debit # Credit # 12/31

Answer 1

Answer

• Adjustment [A]

--Rent expense (nominal account) was debited on May 1 for 18 months rent.
--No. of month expired since 1^st May to 31 Dec = 8 months.
--hence, for excess 10 months, Rent Expense is to be credited.

Date	Accounts title	Debit	Credit
31-Dec	Prepaid Rent ($180000 x 10 months / 18 months)	$10,000
	Rent Expense		$10,000
	(to adjust Rent expense for 8 months expired)

• Adjustment [B]

--Unearned Revenue (Real account) was credited on Aug 1^st when amount was received in advance.
--No. of month till 31 Dec since then = 5 months.
--Hence, 5 month service revenue earned is to be adjusted.

Date	Accounts title	Debit	Credit
31-Dec	Unearned Revenue ($120000 x 5 months / 6 months)	$100,000
	Service Revenue		$100,000