E3-7 The ledger of Passehl Rental Agency on March 31 of the current year include

Question

E3-7 The ledger of Passehl Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Debit Credit Prepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 10,200 Rent Revenue 60,000 Interest Expense –0– Salaries and Wages Expense 14,000 An analysis of the accounts shows the following. The equipment depreciates $400 per month. One-third of the unearned rent revenue was earned during the quarter. Interest of $500 is accrued on the notes payable. Supplies on hand total $750. Insurance expires at the rate of $300 per month. Instructions 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. Prepare adjusting entries. E3-7 The ledger of Passehl Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Debit Credit Prepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 10,200 Rent Revenue 60,000 Interest Expense –0– Salaries and Wages Expense 14,000 An analysis of the accounts shows the following. The equipment depreciates $400 per month. One-third of the unearned rent revenue was earned during the quarter. Interest of $500 is accrued on the notes payable. Supplies on hand total $750. Insurance expires at the rate of $300 per month. Instructions 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. Prepare adjusting entries. E3-7 The ledger of Passehl Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Debit Credit Prepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 10,200 Rent Revenue 60,000 Interest Expense –0– Salaries and Wages Expense 14,000 An analysis of the accounts shows the following. The equipment depreciates $400 per month. One-third of the unearned rent revenue was earned during the quarter. Interest of $500 is accrued on the notes payable. Supplies on hand total $750. Insurance expires at the rate of $300 per month. Instructions 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. Prepare adjusting entries. Debit Credit Prepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent Revenue 10,200 Rent Revenue 60,000 Interest Expense –0– Salaries and Wages Expense 14,000 An analysis of the accounts shows the following. The equipment depreciates $400 per month. One-third of the unearned rent revenue was earned during the quarter. Interest of $500 is accrued on the notes payable. Supplies on hand total $750. Insurance expires at the rate of $300 per month. Instructions 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. Prepare adjusting entries.

Explanation / Answer

Answer

Adjusting Entry no.

Accounts title

Debit

Credit

Working

1

Depreciation Expense

$                                     1,200.00

[$400 per month x 3 months of quarter]

Accumulated Depreciation - Equipment

$                     1,200.00

(depreciation for the quarter recorded)

2

Unearned rent Revenue

$                                     3,400.00

[one third = 10200 x 1/3 = earned]

Rent Revenue

$                     3,400.00

(Unearned revenue now earned)

3

Interest expense

$                                         500.00

Interest Payable

$                        500.00

(Interest accrued to be paid)

4

Supplies expense

$                                     2,050.00

[Unadjusted balance - On hand balance]

Supplies

$                     2,050.00

[2800 - 750]

(Supplies consumed]

5

Insurance Expense

$                                         900.00

[Quarter = 3 months]

Prepaid Insurance

$                        900.00

[$ 300 x 3 months]

(3 months of insurance expired)

Adjusting Entry no.

Accounts title

Debit

Credit

Working

1

Depreciation Expense

$                                     1,200.00

[$400 per month x 3 months of quarter]

Accumulated Depreciation - Equipment

$                     1,200.00

(depreciation for the quarter recorded)

2

Unearned rent Revenue

$                                     3,400.00

[one third = 10200 x 1/3 = earned]

Rent Revenue

$                     3,400.00

(Unearned revenue now earned)

3

Interest expense

$                                         500.00

Interest Payable

$                        500.00

(Interest accrued to be paid)

4

Supplies expense

$                                     2,050.00

[Unadjusted balance - On hand balance]

Supplies

$                     2,050.00

[2800 - 750]

(Supplies consumed]

5

Insurance Expense

$                                         900.00

[Quarter = 3 months]

Prepaid Insurance

$                        900.00

[$ 300 x 3 months]

(3 months of insurance expired)

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