Question

Problem 2: This company's fiscal year is the calendar year. For the following data, it is advisable to set up a “T”-account for each item, with a beginning amount, an ending amount, and any “during the year” activity that takes place.....then, determine the "missing” adjusting entry. In other words, with this starting amount, this ending amount, and the stuff that happens in between, what adjusting entry do I need to take me to the correct ending figure? b) Unearned Rent at January 1, 2019 was $5,300 and at December 31, 2012 was $6,000. The records indicate cash receipts from rental sources during the year amounted to $40,000, all of which was credited to the Unearned Rent account You are to prepare the missing adjusting entry.

Answer 1

Answer: From the aforesaid query given, we can calculate the overall amount of Unearned Rent, Rent receivable for the period. Opening Bal. was $ 5300, Received During the year is $ 40000. ie 40000+5300 (last year advance)-6000 end of year advance=$39700  the amount of Rent for the year. As the total receipt has been so far credited to Unearned Rent Account, we need to pass the missing adjusting entry as under:

Unearned Rent Dr 39700

To Rent 39700

(Being the amount of the Rent due this year credited to Rent Account.)

Note: The difference will be carried forward as unearned rent in Balance Sheet as liability.

The T Account will be as under:

			UNEARNED RENT ACCOUNT
TO RENT ACCOUNT			39700	BY BAL. B/D		5300
(Balancing figure)				BY CASH		40000
TO BAL. C/D			6000
			45300			45300
			RENT ACCOUNT
TO PROFIT & LOSS ACCOUNT			39700	BY UNEARNED RENT		39700
			39700			39700