Any accounting gurus in here that can help me?

5. Bells Co. leases an office to a tenant at the rate of $5,000 per month. The tenant contacted Bells and arranged to pay the rent for December 2004 on January 8, 2005. Bells agrees to this arrangement.

a.) Prepare the journal entry that Bells must make at December 31, 2004 to record the accrued rent revenue.

b.) Prepare the journal entry to record the receipt of the rent on January 8, 2005.

I have no clue where to start.

Please help me.

Which form do I write it on?

T account, balance sheet, income statement?

12/31/04 (dr) rent receivable $5,000, (cr) rental income $5,000


1/8/05 (dr) cash $5,000, (cr) rent receivable $5,000

In retrospect, the "technically proper" way to account for this set of transactions is as follows - make the 12/31/04 entry as shown above. This entry is called an "adjusting entry". Then on 1/1/05 make the following "reversing entry" (dr) rental income $5,000, (cr) rent receivable $5,000. This eliminates the December entry. Then, when the cash is received on 1/8/05 make the same entry you would normally make had the cash been received when due, namely (dr) cash $5,000 and (cr) rental income $5,000. Although the use of a reversing entry in this situation is technically proper the first method accomplishes the same objective with less hassle. The reason you would have to go through these sets of entries is as follows. The 12/31/04 adjusting entry is made to accrue, or give recognition to, the increase in an asset account (the rent receivable - a balance sheet account ) and the increase in a capital account (rental income - an income statement item which comes onto the balance sheet as a capital account when the rental income account is closed out to retained earnings - a balance sheet account). Both sets of entries, using the reversing entry or without the reversing entry, will achieve the same goal of accruing the asset and income in 2004. However use of the reversing entry will allow you to make the customary (dr) cash, (cr) rental income entry when the cash is finally received.