a. Unearned Rent Revenue. The Krug Company collected $10,200 rent in advance on

Question

a. Unearned Rent Revenue. The Krug Company collected $10,200 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 November1 b. Unearned Services Revenue. The company charges $110 per month to spray a house for insects. A customer paid $440 on October 1 in advance for four treatments, which was recorded with a debit to Cash and a credit to Unearned Services Revenue. At year-end, the company has applied three treatments for the customer. c. Unearned Rent Revenue. On September 1, a client paid the company $32,400 cash for six months of rent in advance (the client leased a building and took occupancy immediately). The company recorded the cash as Unearned Rent Revenue.

Explanation / Answer

Krug Company

Adjusting Entries:

Date

Account Titles and Explanation

Ref. No.

Debit

Credit

1

31-Dec

Unearned Rent Revenue

$1,700

Rent Revenue

$1,700

(To recognize the portion of rent revenue earned for November and December - 10,200 x 2/12 = $1,700)

2

31-Dec

Unearned Service Revenue

$330

Service Revenue

$330

(To recognize the portion of service revenue earned during the year - Oct to Dec; 440 x 3/4 = $330)

3

31-Dec

Unearned Rent Revenue

$21,600

Rent Revenue

$21,600

(To recognize the portion of rent revenue earned - September to December; 32,400 x 4/6 = $21,600)

Notes:

Unearned rent revenue = 10,200 for 12 months

Earned portion = 2 months rent revenue

= 10,200 x 2/12 = $1,700

Unearned service revenue = $440 for 4 months

Earned service revenue = 3 months revenue

= 440 x ¾ = $330

Unearned rent revenue = 32,400 for 6 months

Earned rent revenue = 4 months revenue = 32,400 x 4/6 = $21,600

Date

Account Titles and Explanation

Ref. No.

Debit

Credit

1

31-Dec

Unearned Rent Revenue

$1,700

Rent Revenue

$1,700

(To recognize the portion of rent revenue earned for November and December - 10,200 x 2/12 = $1,700)

2

31-Dec

Unearned Service Revenue

$330

Service Revenue

$330

(To recognize the portion of service revenue earned during the year - Oct to Dec; 440 x 3/4 = $330)

3

31-Dec

Unearned Rent Revenue

$21,600

Rent Revenue

$21,600

(To recognize the portion of rent revenue earned - September to December; 32,400 x 4/6 = $21,600)

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