The basic EOQ formula is used to minimize the total of inventory carrying and ordering costs. The basic EOQ equals the square root of a fraction consisting of a numerator equal to the product of twice the unit periodic demand and the variable cost per order and a denominator equal to the unit periodic carrying cost. Using an EOQ analysis assuming a constant demand), it is determined that the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A five-day lead time is needed for delivery. Annual inventory holding costs equal 25% of the average inventory level. It costs the company U $4 per unit to buy the product, which it sells for U $. It costs the company U $150 to place a detailed order, and the monthly demand for the product is 4,000 units.

A deferred revenue is a revenue item that has been received but has not met the recognition criteria, The journal entry described in the question is an adjusting entry to transfer an amount from the revenue account to a liability deferred revenue) account. The initial collection of cash in advance from the tenant was apparently recorded by a credit to revenue. An adjusting entry is for required at year-end to transfer any remaining amount that does not qualify for revenue recognition.