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In: Accounting

The accounting records of Timberline Lodge are maintained on the basis of a fiscal year ending...

The accounting records of Timberline Lodge are maintained on the basis of a fiscal year ending April 30. The facts listed below are to be used for making adjusting entries at April 30, 2018.

A portion of the land owned by Timberline had been leased on April 16, 2018, to a service state operator at a yearly rental of $12,000. One year’s rent was collected in advance at the date of the lease and credited to Unearned Rental Revenue. The lease runs from April 16, 2018 through April 15, 2019.

Solutions

Expert Solution

  • Adjusting entry is required to record the portion of Rental revenue that has been ‘earned’ during the period.
  • Question states that $ 12,000 is for whole year (365 days or 12 months).
  • When $ 12,000 was received, it was recorded as Unearned Rental Revenue.
  • Land leased on April 16,2018. Hence, 15 days rental revenue (till 30 April) or half month rental revenue is ‘earned’ till 30th April.

Amount of rental revenue earned = $ 12,000 x (0.5 months/12 months) = $ 500

  • Adjusting Journal Entry

Date

Accounts title

Debit

Credit

30-Apr

Unearned Rental Revenue

$                                         500.00

   Rental revenue

$                        500.00

( Amount of rent earned for half month recorded)

ekkarill92 answered 1 year ago
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