Question

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $975. Fragmental collected the entire $7800 cash on October 1. The entry on October 1 is: ______________________.

Answer 1

Answer:

Debit cash $7800

Credit unearned revenue $7800

Explanation:

The amount of $7800 was received in cash on October 1. Therefore, the cash account will be debited with the $7800 received.

The corresponding credit entry of $7800 will be to the unearned revenue account since the revenue has not been earned. Revenue will be earned at the end of each month of the lease. This account will subsequently debited each time the revenue is earned i.e at the end of each lease month.