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SOLUTION Problem 8-4 to 8-7 Additional Problems

# SOLUTION Problem 8-4 to 8-7 Additional Problems - Chapter 8...

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Chapter 8 Additional Problems -- SOLUTIONS Unearned Revenue Liabilities Problem 8-4 Collecting Rent In Advance and the Monthly Adjusting Entry Apex Properties, Inc. owns two warehouse buildings that it rents to other businesses. The two buildings are very desirable properties and this enables Apex to require that renters pay rent in advance. The following is data for each building: Building #1 – Located at 111 Warehouse Way Rental rate ................................................................ \$2,000.00 per month Number of months of rent collected in advance ...... 3 months Dates when rent is collected in advance ................. January 1, April 1, July 1, October 1 Building #2 – Located at 444 Storage Street Rental rate ................................................................ \$3,500.00 per month Number of months of rent collected in advance ...... 4 months Dates when rent is collected in advance ................. January 1, May 1, September 1 Apex has the accounting policy that rent collected in advance be initially recorded in a liability account. As of March 1, 2009 the balance in the Unearned Rent Revenue account is \$9,000.00. This balance represents the following: Building #1 – 1 month (March) of unearned rent ........................ (1 x \$2,000) ....... \$2,000.00 Building #2 – 2 months (March and April) of unearned rent ....... (2 x \$3,500) ...... 7,000.00 Total Unearned Rent \$9,000.00 The following is a partial list of the accounts in Apex’s General Ledger. These are the only accounts you need for this problem. Cash Unearned Rent Revenue (this is a liability account) Rent Revenue (this is a revenue account)

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Chapter 8 Solid Footing – Additional Problems Pg. 2 Problem 8-4 (Continued) Put your answers to the following 6 requirements on the Problem 8-4 Answer Forms . Requirement 1 Prepare a “T” account analysis to determine the required March 31, 2009 adjustment to the Unearned Rent Revenue account. As noted above—the balance in the Unearned Rent Revenue account is the total for both buildings. Requirement 2 Prepare the March 31, 2009 General Journal adjusting entry for Unearned Rent Revenue. Requirement 3 On April 1, 2009, the advance payment for rent is received for Building #1. Prepare the General Journal entry to record the receipt of this \$6,000.00 cash. Requirement 4 Prepare a “T” account analysis to determine the required April 30, 2009 adjustment to the Unearned Rent Revenue account. Requirement 5 Prepare the April 30, 2009 General Journal adjusting entry for Unearned Rent Revenue. Requirement 6 What would be the amount of Unearned Rent Revenue shown on Apex Properties, Inc.’s Balance Sheet as of April 30, 2009? What would be the amount of Rent Revenue on the Income Statement for the period April 1 to April 30, 2009?
Chapter 8 Solid Footing – Additional Problems Pg. 3 Name: Solution Section: #: Problem 8-4 Answer Forms Requirement 1 – “T” Account Analysis for the March 31 adjusting entry “T” Account Analysis for Assets and Liability Accounts Account Name Unearned Rent Revenue Debit Credit (1) What is the current balance? 9,000.00 (3) What adjustment is required to adjust from the current balance to the should be balance?

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