Fragmental Co

question 239

Multiple Choice

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $800. Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be:

• A) A debit to Rent Revenue and a credit to Cash for $2,400.
• B) A debit to Rent Revenue and a credit to Unearned Rent for $2,400.
• C) A debit to Unearned Rent and a credit to Rent Revenue for $4,000.
• D) A debit to Unearned Rent and a credit to Rent Revenue for $2,400.
• E) A debit to Cash and a credit to Rent Revenue for $6,400.

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Definitions:

Interest Rates

Interest Rates are the cost of borrowing money, expressed as a percentage of the amount borrowed, that is charged by lenders to borrowers for the use of their funds.

Senior Debt

Debt that must be repaid before subordinated debt in the case of a liquidation, generally carrying lower risk and, therefore, a lower interest rate.

Subordinated Debt

A type of debt that ranks below other debts and securities in terms of claims on assets or earnings in the event of a liquidation.

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures.