I would like for someone to help me get a better prospective on this use of words that keeps me confused.
d. The unearned rent account balance at August 31 is $9,375, representing the receipt of an advance payment on August 1 of three months' rent from tenants.

That is pretty clear it is rent I received $9375 div by 3 = 3125
debit 3125 for unearned rent
then credit 3125 for rent revenue.

another problem says it is " rent unearned at Dec 31 of $1500
so am I just posting this ($1500) or is it similar to the prepaid rent and I need to subtract it from the original balance of $3600?

I basically need to get an idea in my head as to how to comprehend the difference in the wording.
Thanks for so far you have been great.
Bgriffi:)

Dec 5, 2006, 09:20 PM #2 Report Inappropriate Post
CaptainForest
Ultra Member





Join Date: Nov 2005
Location: Canada
Posts: 3,669
If you have 1,200 of unearned rent at the beginning and now at the end of the year you only have $400 left, that means that you USED (1,200-400) $800 worth of rent.

Dr. Rent Expense 800
Cr. Unearned Rent 800

Comments on this post
bgriffi3 agrees: This is so good I cut and pasted it to my new book mark.

Thanks I found CaptainForest!

Except for the fact that the answer is incorrect. You would never have rent expense and unearned rent in the same entry. Since CaptainForest did know what he was doing, perhaps he had not had enough coffee that day, I don't know.

UNEARNED rent means it was paid in advance to you and that you have not provided the rent to the other party as of yet. Therefore, a liability, because you have an obligation to provide that space or whatever you're renting. It is not EARNED yet.

As the months go by, and the rental space/object is provided, it becomes earned and you can then record those earnings.

What does that have to do with rent expense? Nothing.

If the problem states there is "$x amount of unearned rent at xx/xx/xx date," then they are saying that's the portion that is unearned as of that date. Meaning you need to make the account equal that amount. It is similar to the prepaid rent account in the sense that a certain portion is already used up and a certain portion belongs to the future. (They're both deferrals, one a deferred revenue and one a deferred expense.) The $1500 they are giving you belongs to the future and is still unearned. That's what you want to leave in the account. The rest of it was earned and should be moved to the earnings account. The $1500 is not the portion that was earned -- it doesn't say that.

Thanks Morgaine, I just ripped up the bookmark. I now, thanks to you, have the undestanding I need to go forward. I wrote the test answer just like the above answer and was wrong, so when I made the book mark I thought Oh no! This is still not right even though I thought it was.
I now understand about it not being my expense, therefore it has to be unearned rent debit, from credit of rent revenue.
I have been about to go crazy over this.
Sooo It can only be my rent expense if it is my rent not something I am providing for someone who paid me the rent in advance called unearned rent to me! Is that right?
Bless you, thank you!

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Thanks Morgaine, I just ripped up the bookmark.

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I'd like to learn that trick. I've tried ripping up the monitor a few times and it's never worked.

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Sooo It can only be my rent expense if it is my rent not something I am providing for someone who paid me the rent in advance called unearned rent to me! Is that right?

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Correct. You always have to consider who is paying who. You can both rent something yourself from someone else and you can rent something to someone else.