Question

The following two events occurred for Trey Co. on October 31, 2017, the end of its fiscal year.

a. Trey rents a building from its owner for \(2,800 per month. By a prearrangement, the company delayedpaying October’s rent until November 5. On this date, the company paid the rent for both Octoberand November.

b. Trey rents space in a building it owns to a tenant for \)850 per month. By prearrangement, the tenantdelayed paying the October rent until November 8. On this date, the tenant paid the rent for bothOctober and November.

Required

1. Prepare adjusting entries that the company must record for these events as of October 31.

2. Assuming Trey does notuse reversing entries, prepare journal entries to record Trey’s payment of renton November 5 and the collection of the tenant’s rent on November 8.

3. Assuming that the company uses reversing entries, prepare reversing entries on November 1 and thejournal entries to record Trey’s payment of rent on November 5 and the collection of the tenant’s renton November 8.

Short answer

Rent expense debited and rent payable credit with $2,800. Rent receivable account is debited and rent revenue credited with $850.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of rent payable

Rent payable is the rent that is due but not paid.

Adjustment entries for October 31

	Journal entry
Date	Particulars	Debit	Credit
October 31	Rent Expenses	$2,800
	Rent Payable		$2,800
	(Adjusting entry for rent payable)
October 31	Rent Receivable	$850
	Rent Revenue		$850
	(Being adjusting entry for rent receivable)