Question

E3-5 (LO 3) 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. Credit $ Debit 3,600 2,800 25,000 $ Prepaid Insurance Supplies Equipment Accumulated Depreciation Equipment Notes Payable Uneamed Rent Revenue Rent Revenue Interest Expense Salaries and Wages Expense 8,400 20.000 9,300 60.000 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 recognized as revenue 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. (Omit explanations.) Debit Credit 1 2 3 5

Answer 1

1.

Depreciation Expense Dr. 3,000

To Accumulated Depreciation-Equipment 3,000

*$250 per month*12 months = $3,000

2.

Rent Revenue Dr. 3,100

To Unearned Rent Revenue 3,100

*$9,300/3 = $3,100

3.

Interest Expense Dr. 500

To Interest Payable 500

4.

Supplies Expense Dr. 850

To Supplies 850

5.

Insurance Expense Dr. 3,600

To Prepaid Insurance 3,600

Assumed Insurance was prepaid in begining of year, Therefore $300 per month *12 months= $3600