Adjustment for Unearned Revenue On June 1, 2019, Herbal Co. received $54,450 for the rent of...

Adjustment for Unearned Revenue On June 1, 2019, Herbal Co. received $54,450 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 2019. Round your answers to the nearest dollar amount.

Expert Solution

Solution:

Date	General Journal	Debit	Credit
December 31, 2019	Unearned rent	31,763
	Rent revenue		31,763

Working Notes:
	Rent earned during 2019 = (Total rent /12 months) x month expired till 31 December
		=(54,450/12) x 7
		=31,762.5
		=31,763

When rent is received , on 1st June , it is unearned revenue for the company , as it is received, so revenue will be recognized as rent period is expired, on 31st December 7 month is expired means 7 month rent revenue is earned by the company.

On 1st June 2019 receiving Journal entry should have done is this

Date	General Journal	Debit	Credit
1 June, 2019	Cash	54,450
	Unearned rent		54,450

on December 31, 2019 , revenue of 7 month rent is earned so

Date	General Journal	Debit	Credit
December 31, 2019	Unearned rent	31,763
	Rent revenue		31,763

Notes:	Balance Unearned rent = 54,450 -31,763 =22,687.

Notes:	The working notes explanation is just given for your understanding.


Please feel free to ask if anything about above solution in comment section of the question.

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