Question

if you could help me with #3 please. thank you

The following transactions occurred during December 31, 2021, for the Microchip Company. 1. On October 1, 2021, Microchip lent $87,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022. 2. On November 1, 2021, the company paid its landlord $8,400 representing rent for the months of November through January. Prepaid rent was debited. 3. On August 1, 2021, collected $14,400 in advance rent from another company that is renting a portion of Microchip's factory. The $14,400 represents one year's rent and the entire amount was credited to deferred rent revenue.

Answer 1

#3

There are two journal entries – one is collection of $14,400, and the other is the recognising revenue.

Journals

Transaction	General journal	Debit	Credit
3.	Cash	$14,400
	Deferred rent revenue		$14,400
	To record collection of advance rent on 1/8/2021
	Deferred rent revenue	$6,000
	Rent revenue		$6,000
	To record recognizing rent revenue for 5 months – August to December.

Note: Rent revenue = (14,400 / 12 months in a year) × 5 months

                                    = (14400 / 12) × 5

                                    = 6,000