(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.
Prepaid Insurance $ 3,600
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.
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.
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 ...
Classic adjusting entries!