Fragmental Co.leased a portion of its store to another company for eight months beginning on October 1,at a monthly rate of $800.Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue.The journal entry made by Fragmental Co.at year-end on December 31 would be:
A)A debit to Rent Revenue and a credit to Cash for $2,400.
B)A debit to Rent Revenue and a credit to Unearned Rent for $2,400.
C)A debit to Cash and a credit to Rent Revenue for $6,400.
D)A debit to Unearned Rent and a credit to Rent Earned for $2,400.
E)A debit to Unearned Rent and a credit to Rent Earned for $4,000.

Question

Quizplus · Accepted Answer

Fragmental Co. needs to recognize the earned portion of the rent for the three months (October, November, December) which is $800 x 3 = $2,400. Therefore, they debit Unearned Rent and credit Rent Earned for $2,400.