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

Question

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $925. Fragmental collected the entire $7,400 cash on October 1 and recorded it as unearned revenue. The journal entry made by Fragmental Co. at year-end on December 31 would be:

A debit to Cash and a credit to Rent Revenue for $7,400.

A debit to Unearned Rent and a credit to Rent Earned for $4,625.

A debit to Rent Revenue and a credit to Cash for $2,775.

A debit to Rent Revenue and a credit to Unearned Rent for $2,775.

A debit to Unearned Rent and a credit to Rent Earned for $2,775.

Explanation / Answer

Correct option is A debit to Unearned Rent and a credit to Rent Earned for $2,775.

Rent earned

October 1 = $ 925

November 1 = $ 925

december 1 = $ 925

Total = $ 2,775

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