ABC Coleased a Portion of Its Store to Another Company for for Eight

question 2

Multiple Choice

ABC Co.leased a portion of its store to another company for eight months beginning on October 1,2014,at a monthly rate of $800.This other company paid the entire $6,400 cash on October 1,which ABC Co.recorded as unearned revenue.The journal entry made by ABC Co.at year-end on December 31,2014,would include a:

• A)Debit to Rent Earned for $2,400.
• B)Credit to Unearned Rent for $2,400.
• C)Debit to Cash for $6,400.
• D)Credit to Rent Earned for $2,400.
• E)Debit to Unearned Rent for $4,000.

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Definitions:

Individual Companies

Refers to separate, distinct legal business entities, as opposed to conglomerates or groups of companies under common ownership or control.

Retrospective Application Method

An accounting method that applies a new policy or correction as if it had always been in effect, adjusting past financial statements accordingly.

Previously Released

Referring to information or data that has been made available to the public before the current date.

All-Inclusive Income Concept

A method of accounting where every revenue, gain, expense, and loss is included in the income statement to give a comprehensive view of financial performance.