At December 31, 2013, for the Microchip Company for each of the following situat
ID: 2377370 • Letter: A
Question
At December 31, 2013, for the Microchip Company for each of the following situations assume that no financial statements were prepared during the year and no adjusting entries were recorded.
On October 1, 2013, Microchip lent $91,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2014.
On November 1, 2013, the company paid its landlord $9,600 representing rent for the months of November through January. Prepaid rent was debited.
On August 1, 2013, collected $15,600 in advance rent from another company that is renting a portion of Microchip
At December 31, 2013, for the Microchip Company for each of the following situations assume that no financial statements were prepared during the year and no adjusting entries were recorded.
Explanation / Answer
1. On October 1, 2011, Microchip lent $98,500 to another company. A note was signed with principal and 7% interest to be paid on September 30, 2012.98,500 X 7% /12 X 3 = 1724
Debit Interest Receivable 1724
Credit Interest Income 1724
2. On November 1, 2011, the company paid its landlord $5,100 representing rent for the months of November through January. Prepaid rent was debited.
5100 / 3 X 2 = 3400
Debit Rent Expense 3400
Credit Prepaid Rent 3400
3. On August 1, 2011, collected $19,000 in advance rent from another company that is renting a portion of Microchip
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