b. The rent is treated as a liability because it is unearned. The rental agency owes the tenant the use of the property until the end of the term of the agreement. The rent should be recognized as income over the period covered by the rent.

b. The rent is treated as a liability because it is unearned. The rental agency owes the tenant the use of the property until the end of the term of the agreement. The rent should be recognized as income over the period covered by the rent.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

b. The rent is treated as a liability because it is unearned.
The rental agency owes the tenant the use of the
property until the end of the term of the agreement. The
rent should be recognized as income over the period
covered by the rent.

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