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Important information about Adjusting Entries

(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.

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