D is corrent.
The solutions approach is to determine how much of the annual rental payment is earned income and how much should be deferred to the next period. The amount earned this period is calculated by multiplying the annual payments by that portion of the year that has expired since May 1, year 1 ($18,000 x 8/12 = $12,000). The adjusting entry is| Unearned rental income | 12,000 | |
| Rental income | | 12,000 |
B is incorrect. The solutions approach is to determine how much of the annual rental payment is earned income and how much should be deferred to the next period. The amount earned this period is calculated by multiplying the annual payments by that portion of the year that has expired since May 1, year 1 ($18,000 x 8/12 = $12,000). The adjusting entry is
C is incorrect. The solutions approach is to determine how much of the annual rental payment is earned income and how much should be deferred to the next period. The amount earned this period is calculated by multiplying the annual payments by that portion of the year that has expired since May 1, year 1 ($18,000 x 8/12 = $12,000). The adjusting entry is
A is incorrect. The solutions approach is to determine how much of the annual rental payment is earned income and how much should be deferred to the next period. The amount earned this period is calculated by multiplying the annual payments by that portion of the year that has expired since May 1, year 1 ($18,000 x 8/12 = $12,000). The adjusting entry is
