Question

The ledger of Marco Rentals on 30 June 2019 includes the following selected accounts before adjusting entries have been prepared:

	Debit $	Credit $
Prepaid insurance	28080
Supplies	16800
Equipment	195000
Accumulated depreciation—equipment		39000
Bank loan		156000
Rent revenue received in advance		72540
Rent revenue		468000
Wages expense	109200

An analysis of the accounts shows the following adjustments that need to be made:

1. The equipment depreciates $3250 per month.
2. The rent revenue received in advance was for 9 months commencing 1 June.
3. Interest of $1950 is accrued on the bank loan.
4. Supplies on hand total $5600.
5. The benefits of prepaid insurance expire at the rate of $2340 per month.

Required

a)     Prepare the adjusting entries at 30 June 2019.

b)    Determine the adjusted balances of the following general ledger accounts at 30 June 2019. (Total 15 Marks)

	Debit $	Credit $
1.     Rent revenue received in advance
2.     Supplies
3.     Prepaid insurance

Answer 1

Journal entry
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Depreciation expense		3250
	Accumulated dep				3250
	(for depreciation)
b.	Rent revenue received in advance	8060
	Rental revenue				8060
	(fr revenue recognized)
c.	Interest expense			1950
	Interest payable				1950
	(for interest accrued)
d.	Supplies expense			11200
	Supplies account (16800-5600)		11200
	(for supplies consumed)
e.	Insurance expense			2340
	Prepaid insurance				2340
	(for insurance expired)
Adjusted Balance:
Rent received in advance (72540-8060):	64480
Supplies (16800-11200):		5600
Prepaid insurance (28080-2340):	25740