Question

In: Accounting

On November 1, 2016, Gordon Co. collected $10,380 in cash from its tenant as an advance...

On November 1, 2016, Gordon Co. collected $10,380 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.

a-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.)

Balance Sheet

Income Statement

Assets

Liabilities

Stockholders’ Equity

←

Net Income

Revenues

−

Expenses

←

−

a-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.)

Balance Sheet

Assets

Liabilities

Stockholders’ Equity

←

Net Income

Revenues

−

Expenses

←

−

Record the receipt a six-month advance rent payment.

Note: Enter debits before credits.

a-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.)

Event	General Journal	Debit	Credit
1

Journal entry worksheet

Record a reduction in the liability account for rent earned each month.

Note: Enter debits before credits.

a-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.)

Event	General Journal	Debit	Credit
1

b. Calculate the amount of unearned rent that should be shown on the December 31, 2016, balance sheet with respect to this lease.

Unearned rent

c. 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?


Current liability
Noncurrent liability

Solutions

Expert Solution

ekkarill92 answered 8 months ago

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