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On october 1, goodwell company rented warehouse space to a tenant for $2,500 per month. The tenant paid five months' rent in advance on that date. The collection was credited to the unearned rent account. The company's annual accounting period ends on december 31. The adjusting entry needed on december 31 is:

Respuesta :

Nonicorp1

Answer:

Adjusting entry=$5000

Explanation:

Unearned revenue is revenue that has not been earned. For example in the question above, the advance payment excluding the month of October are unearned.

Rent=$2,500 per month

Unearned amount at October 1=(2500×5)=12500

Earned amount for December 31(October, November and December)=3 months

Earned amount at Dec 31=(2500×3)=7500

Adjusting entry=(Unearned amount-Earned amount)

(12500-7500)=$5000

Unearned amount on December 31=$5000

Earned amount by December 31=$7500

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