Question

In: Accounting

Fragmental Co. leased a portion of its store to another company for eight months beginning on...

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $1,150. Fragmental collected the entire $9,200 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:

Multiple Choice

  • A debit to Rent Revenue and a credit to Cash for $3,450.

  • A debit to Rent Revenue and a credit to Unearned Rent for $3,450.

  • A debit to Cash and a credit to Rent Revenue for $9,200.

  • A debit to Unearned Rent and a credit to Rent Revenue for $3,450.

  • A debit to Unearned Rent and a credit to Rent Revenue for $5,750

Solutions

Expert Solution

Answer

Option d

Explanation

Unearned rent a/c Dr. $3,450

To Rent revenue Cr. $3,450

Unearned rent is debited because unearned rent is the liability of the company. Value of Unearned rent is reduced due to the adjustment of the unearned rent into the rent revenue of the company and a decrease in the value of unearned rent is always debited as it is a liability.

Rent revenue is credited because it is a revenue/gain of the company and all the revenue/gains of the company are always credited in the books of accounts.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Fragmental Co. leased a portion of its store to another companyfor eight months beginning on...
Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $1,025. Fragmental collected the entire $8,200 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:A.) A debit to Unearned Rent and a credit to Rent Revenue for $5,125.B.) A debit to Rent Revenue and a credit...
The Ocean-Store Hypermarket is considering acquiring another of its regional competitor in Terengganu. The Ocean-Store plans...
The Ocean-Store Hypermarket is considering acquiring another of its regional competitor in Terengganu. The Ocean-Store plans to finance the purchase by the sale of common stocks or a debt issue. The company finance manager is required to evaluate how the two alternative financing plans will affect the earnings potential of the company. Total financing required is $20 million. The company tax rate is 40 percent. The company’s current structure is as follows: $50,000,000 of 10% bonds (Par value $1,000 per...
On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight...
On January 1, 2018, Packard Corporation leased equipment to Hewlitt Company. The lease term is eight years. The first payment of $450,000 was made on January 1, 2018. Remaining payments are made on December 31 each year, beginning with December 31, 2018. The equipment cost Packard Corporation $2,400,000. The present value of the lease payments is $2,640,788. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, what will be the balance...
2). XYZZ Company leased equipment from RRR Company on July 1, year x1, for an eight-year...
2). XYZZ Company leased equipment from RRR Company on July 1, year x1, for an eight-year period expiring June 30, year x9. Equal annual payments under the lease are $200,000 and are due on July 1 of each year. The first payment was made on July 1, x1. The rate of interest contemplated by Trump and Reagan is 8%. The cash selling price of the equipment is $1,241,250 and the cost of the equipment on Reagan's accounting records was $1,100,000....
Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported...
Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $121,000 for the equipment in its inventory account. The lease commenced on January 1, 2020, with the first annual payment of $40,700 due immediately. The equipment has a useful life of 4 years, an estimated fair value of $151,536, and no residual or salvage value. The implicit rate of the lease is 5% and collectibility of the lease payments from...
On December 31, 2021, Blossom Corporation leased a ship from Fort Company for an eight-year period...
On December 31, 2021, Blossom Corporation leased a ship from Fort Company for an eight-year period expiring December 30, 2029. Equal annual payments of $420000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Blossom‘s books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 9% is $2533839. Assuming all payments are made on time, the amount...
Metlock Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is...
Metlock Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 5 years and requires equal rental payments of $75,477 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $320,000, an estimated useful life of 5 years, and no estimated residual value. The appropriate interest rate is 9%. Click here to view factor...
Amusement Company leased equipment from General Robotics Company, beginning on January 1, 2017. The lease term...
Amusement Company leased equipment from General Robotics Company, beginning on January 1, 2017. The lease term is 5 years and requires equal rental payments of $60,493 at the beginning of each year of the lease (based on a 6% interest rate) starting on the commencement date (January 1, 2017). The equipment has a fair value at the commencement date of the lease of $300,000, a carrying value to General Robotics of $275,000, an estimated useful life of 5 years, and...
Amusement Company leased equipment from General Robotics Company, beginning on January 1, 2017. The lease term...
Amusement Company leased equipment from General Robotics Company, beginning on January 1, 2017. The lease term is 5 years and requires equal rental payments of $60,493 at the beginning of each year of the lease (based on a 6% interest rate) starting on the commencement date (January 1, 2017). The equipment has a fair value at the commencement date of the lease of $300,000, a carrying value to General Robotics of $275,000, an estimated useful life of 5 years, and...
Eight months ago, you sold short 1,000 shares of ABC Company at $30 per share. The...
Eight months ago, you sold short 1,000 shares of ABC Company at $30 per share. The initial margin requirement is 50% and maintenance margin is 30%. Ignoring borrowing cost of the shares, a) calculate the price level that you receive margin call. b) calculate the (i) holding period percentage return and (ii) annual percentage return (APR) of your margin position if you close the margin position at $28 today, immediately after dividend of $1 per share was paid by the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT