Answer:
To record the payment of rent on November 1, 2021, with the prepaid rent debited, the journal entry would be as follows:
Journal Entry on November 1, 2021:
Debit: Prepaid Rent $4,000
Credit: Cash $4,000
This entry recognizes the payment of rent in advance for the months of November, December, and January. Prepaid rent is considered an asset because it represents rent paid in advance for future use.
Next, at the end of each month, you need to recognize the expense for the rent that has been used up. Since the rent payment covers three months, you will allocate $4,000/3 = $1,333.33 per month.
Journal Entry at the end of November (and similarly for December and January):
Debit: Rent Expense $1,333.33
Credit: Prepaid Rent $1,333.33
This entry reduces the prepaid rent asset and recognizes the rent expense for the month. Repeat this entry at the end of December and January to fully expense the prepaid amount.