On May 1, a company received $24,000 cash for rent in advance. What journal entry is necessary to record this transaction?

The journal entry necessary to record the transaction of receiving $24,000 cash for rent in advance involves recognizing a liability because the company has not yet provided the rental service. When cash is received in advance of earning the revenue, it is recorded as unearned rent.

This is reflected correctly by crediting the unearned rent account, which is a liability account. The credit to unearned rent signifies that the company has an obligation to provide rental services in the future. The corresponding debit would be to cash, indicating that the company has received cash and increased its cash balance. Thus, the entry reflects the receipt of cash while appropriately accounting for the obligation to deliver future services.

The correct entry recognizes that the cash received cannot yet be recognized as revenue; instead, it is recognized as a liability until the rental services are rendered. This aligns with the revenue recognition principle in accounting, which states that revenue should only be recognized when it is earned.