Question

Upsilon Corp. had a vacant warehouse that it rented out to Omnicron Distributers for a monthly rent of $9,900. During December 2019, Upsilon collected $7,000 cash from Omnicron for the December 2019 rent. Which of the following is correct with respect to the December 2019 financial statements of Upsilon Corp?

$9,900 would appear on the income statement as rent revenue earned.??

$9,900 would appear on the balance sheet as rent receivable.

$9,900 would be reported on the statement of cash flows.

$7,000 would appear on the balance sheet as prepaid rent.

$7,000 would appear on the balance sheet as unearned rent revenue.

Answer 1

Correct answer:

Option(1) is correct statement that $9,900 would appear on the income statement as rent revenue earned. $9,900 is the total rent earned in December and even cash is received of $7,000,but the $9,900 should appear on the income statement as rent revenue earned.

Incorrect answers:

Option(2) is incorrect answer that is $9,900 would appear on the balance sheet as rent receivable because the ($9,900 - $7,000) = $2,900 would appear on the balance sheet as rent receivable.

Option(3) is incorrect answer that is $9,900 would be reported on the statement of cash flows because $7,000 would be on the statement of cash flows.

Option(4) is incorrect answer that is $7,000 would appear on the balance sheet as prepaid rent.Becuase $9,900 is the total rent revenue earned so it is shown in the income statement of the company.

Option(5) is incorrect answer that is $7,000 would appear on the balance sheet as unearned rent revenue.Becuase $9,900 is the total rent revenue earned so it would appear on the income statement of the company.

So correct answer is option(1)