Question

The ledger of Perez Rental Agency on March 31 of the current year includes the selected accounts, shown below, before quarterly adjusting entries have been prepared.
Debit Credit
Prepaid Insurance $3,600
Supplies 2,800
Equipment 25,000
Accumulated
Depreciation—Equipment $84,000
Notes Payable 20,000
Unearned Rent Revenue 10,200
Rent Revenue 60,000
Interest Expense 0
Salaries and Wages 14,000

An analysis of the accounts shows the following.
1. The equipment depreciates $400 per month.
2. One-third of the unearned rent revenue was earned during the quarter.
3. Interest totaling $500 is accrued on the notes payable for the quarter.
4. Supplies on hand total $900.
5. Insurance expires at the rate of $200 per month.

Required:
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

Answer 1

Answer:

1. The equipment depreciates $400 per month.

Dr Depreciation expense 1,200

    Cr Accumulated depreciation - equipment 1,200

3 months worth of depreciation expense

2. One-third of the unearned rent revenue was earned during the quarter.

Dr Unearned rent revenue 3,400

    Cr Rent revenue 3,400

3. Interest totaling $500 is accrued on the notes payable for the quarter.

Dr Interest expense 500

    Cr interest payable 500

4. Supplies on hand total $900.

Dr Supplies expense 1,900

    Cr Supplies 1,900

5. Insurance expires at the rate of $200 per month.

Dr Insurance expense 600

    Cr Prepaid insurance 600

3 months worth of insurance expense