Question

Prepare adjusting entries from selected account data. E3.7 (LO 2, 3) The ledger of Passehl Rental Agency on March 31 of the current year includes the se- lected accounts, shown below, 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 10,200 Rent Revenue 60,000 Interest Expense Salaries and 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 revenue was earned during the quarter. 3. Interest of $500 is accrued on the notes payable. 4. Supplies on hand total $750. 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. Addi- tional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

Answer 1

Date	General journal	Debit	Credit
March 31	Depreciation expense	1,200
	Accumulated depreciation- Equipment		1,200
	( To record depreciation expense)
March 31	Unearned rent revenue	3,400
	Rent revenue		3,400
	( To record unearned rent revenue earned)
March 31	Interest expense	500
	Interest payable		500
	( To record interest expense)
March 31	Supplies expense	2,050
	Supplies		2,050
	( To record supplies expense)
March 31	Insurance expense	900
	Prepaid insurance		900
	( To record insurance expense)

1.

Depreciation expense per month = $400

Depreciation expense per quarter = 400 x 3

= $1,200

2.

Unearned rent revenue earned = 10,200 x 1/3

= $3,400

4.

Supplies expense = Unadjusted supplies - Ending supplies

= 2,800-750

= $2,050

5.

Insurance expense per month = $300

Insurance expense per quarter = 300 x 3

= $900

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