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In: Accounting

On November 1, 2016, Gordon Co. collected $4,920 in cash from its tenant as an advance...

On November 1, 2016, Gordon Co. collected $4,920 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2017, at which time the contract may be renewed.

  1. Use the horizontal model to record the effect of the six months of rent collected in advance on November 1, 2016 for Gordon Co. (Use amounts with + for increases and amounts with – for decreases.)
  2. Use the horizontal model to record the effect of the adjustment that will be made at the end of each month to show the amount of rent "earned" during the month for Gordon Co. (Use amounts with + for increases and amounts with – for decreases.)
  3. Record the journal entry to show the effect of the six months of rent collected in advance on November 1, 2016 for Gordon Co. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  4. Record the journal entry to show the effect of the adjustment that will be made at the end of each month to show the amount of rent "earned" during the month for Gordon Co. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  5. Calculate the amount of unearned rent that should be shown on the December 31, 2016, balance sheet with respect to this lease.
  6. Suppose the advance collection received on November 1, 2016, covered an 30-month lease period at the same amount of rent per month. How should Gordon Co. report the unearned rent amount on its December 31, 2016, balance sheet?

Solutions

Expert Solution

BALANCE SHEET
Assets = Liabilities + Stockholder Equity Net Income = Revenue - Expense
Nov-01 Cash + $      4,920 Advance Rent +$ 4,920
Nov-30 Advance Rent $   -820

+ $ 820

 + $ 820 Rent Earned + $ 820 $       -  
Dec-31 Advance Rent $   -820 + $ 820 + $ 820 Rent Earned + $ 820 $       -  
Jan-31 Advance Rent $   -820 + $ 820 + $ 820 Rent Earned + $ 820 $       -  
Feb-28 Advance Rent $   -820 + $ 820 + $ 820 Rent Earned + $ 820 $       -  
Mar-31 Advance Rent $   -820 + $ 820 + $ 820 Rent Earned + $ 820 $       -  
Apr-30 Advance Rent $   -820 + $ 820 + $ 820 Rent Earned + $ 820 $       -  
Date Account and explanation debit credit
Nov 1 Cash $ 4,920
   Unearned rent revenue $ 4,920
(To record rent in advance)
Unearned rent revenue $ 820
    Rent revenue $ 820
(To record rent revenue)

ekkarill92 answered 1 hour ago
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