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    Important information about Adjusting Entries

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    (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts 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 9,300
    Rent Revenue 60,000
    Interest Expense -0-
    Wage Expense 14,000

    An analysis of the accounts shows the following.

    1. The equipment depreciates $250 per month.
    2. One-third of the unearned rent was earned during the quarter.
    3. Interest of $500 is accrued on the notes payable.
    4. Supplies on hand total $850.
    5. 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.

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    https://brainmass.com/business/the-adjusting-process/important-information-about-adjusting-entries-77896

    Solution Preview

    Before preparing the adjusting entries, it will be good to work through points 1 – 5.
    1. Depreciation $250 per month = Depreciation Expense $250 x 3 = $750 per quarter
    2. 1/3 unearned rent is earned = Rent Revenue = 1/3 x $9300 = $3100
    3. Interest Expense = $500
    4. Supplies Expense = $2800 ...

    Solution Summary

    Classic adjusting entries!

    $2.19

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