19.07.2022 - 02:59

Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n): a. Asset. b. Liability. c. Capital stock. d. Revenue.

Question:

Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n):

a. Asset.

b. Liability.

c. Capital stock.

d. Revenue.

Answers (1)
  • Johnnie
    April 5, 2023 в 20:37
    The correct answer is (a) Asset. Unearned rent is a payment received in advance for future services to be provided, in this case, the occupancy of the property for six months. Therefore, it represents an economic benefit that the landlord has yet to provide and is classified as a current liability until the services are rendered. Once the tenant has occupied the property for the specified period, the unearned rent will be recognized as revenue earned and will be moved from a liability to an asset account. Until then, it remains an asset as it represents the amount that the landlord is entitled to receive from the tenant for future services.
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