Recording Adjusting Journal Entries
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E3-7 The ledger of Piper 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 9,900
Rent Revenue 60,000
Interest Expense 0
Wages Expense 14,000
An analysis of the accounts shows the following.
1. The equipment depreciates $400 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 $700.
5. Insurance expires at the rate of $200 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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Solution Summary
This solution illustrates the journal entries used to record adjusting entries for earned rent, accumulated depreciation, expired insurance, adjusting the count of supplies to actual, and accruing interest expense on a note payable.
Solution Preview
1. The equipment depreciates at $400 per month or $1,200 per quarter, so the entry should be:
3/31 Depreciation Expense 1,200
Accumulated Depreciation-Equipment 1,200
To record depreciation for the quarter ended March 31.
2. The total unearned rent was $9,900. If one-third was earned, $9,900/3, or $3,300 was earned. The entry is:
3/31 ...
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