Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 27

Unearned revenues-rent (Note: See Exercise 5.20 for the related prepaid expense accounting.) On November 1, 2016, Gordon Co. collected $75,600 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2017, at which time the contract may be renewed.
Required:
a. Use the horizontal model (or write the journal entries) to record the effects of the following items for Gordon Co.:
1. The six months of rent collected in advance on November 1, 2016.
2. The adjustment that will be made at the end of each month to show the amount of rent "earned" during the month.
b. Calculate the amount of unearned rent that should be shown on the December 31, 2016, balance sheet with respect to this lease.
c. Suppose the advance collection received on November 1, 2016, covered an 18-month lease period at the same amount of rent per month. How should Gordon Co. report the unearned rent amount on its December 31, 2016, balance sheet?
Reference Exercise 5.20:
Prepaid expenses-rent
(Note: See Problem 7.25 for the related unearned revenue accounting.)On November 1, 2016, Wenger Co. paid its landlord $75,600 in cash as an advance rent payment on its store location. The six-month lease period ends on April 30, 2017, at which time the contract may be renewed.
Required:
a. Use the horizontal model or write the journal entry to record the six-month advance rent payment on November 1, 2016.
b. Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amount of rent "used" during the month.
c. Calculate the amount of prepaid rent that should be reported on the December 31, 2016, balance sheet with respect to this lease.
d. If the advance payment made on November 1, 2016, had covered an 18-month lease period at the same amount of rent per month, how should Wenger Co. report the prepaid amount on its December 31, 2016, balance sheet?