Question

The ledger of Skysong Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.

		Debit			Credit
Prepaid Insurance		$3,912
Supplies		2,576
Equipment		23,910
Accumulated Depreciation-Equipment					$8,799
Notes Payable					19,490
Unearned Rent Revenue					4,650
Rent Revenue					64,390
Interest Expense		–0–
Salaries and Wages Expense		15,370

An analysis of the accounts shows the following.

1.		The equipment depreciates $243 per month.
2.		One-third of the unearned rent was earned as revenue during the quarter.
3.		Interest of $510 is accrued on the notes payable.
4.		Supplies on hand total $703.
5.		Insurance expires at the rate of $326 per month.

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 Expenses.

Answer 1

Adjusting entries :

Date	accounts & explanation	debit	credit
	Depreciation expenses a/c (243*3)	729
	Accumlated depreciation-Equipment a/c		729
	(To record depreciation exp)
	Unearned rent revenue (4650/3)	1550
	Rent revenue a/c		1550
	(To record earned rent revenue)
	Interest expenses	510
	Interest payable a/c		510
	(TO record accured interest payable)
	Supplies expenses a/c	1873
	Supplies a/c		1873
	(To record supplies expenses)
	Insurance expenses a/c (326*3)	978
	Prepaid insurance		978
	(To record insurance expenses adjusted)