Question

Vandelay company received $18,000 on April 1, 2020, for one year's rent in advance and recorded the transaction with a credit to a nominal account. December 31, 2020, adjusting entry is?

Answer 1

As per Information provided, the one year advance is credited to nominal account. It means they recorded as "Rent Revenue" instead of "Unearned Rent". So, we have to make adjusting entry to recognize "Unearned Rent" by debiting that nominal account for the unearned portion of rent revenue. One Year Rent Amount $ 18,000.00 Period of Rent Earned = from April 1 to December 31 = 9 Months Period of Rent Not Earned = 12 months - 9 months = 3 months Unearned Rent Amount = $18000/12 months x 3 months = $4,500.00 Now, the Journal Entry is as follows Journal Entries Date Account Title and Explaination Post. Ref. Debit $ Credit $ Dec.31 $ 4,500.00 $ 4,500.00 Rent Revenue Unearned Rent Revenue (To record adjusting entry for unearned portion of rent revenue)