Question

The ledger of Metlock, Inc. on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared.

		Debit		Credit
Supplies		$3,900
Prepaid Insurance		4,680
Equipment		32,500
Accumulated Depreciation—Equipment				$10,920
Notes Payable				26,000
Unearned Rent Revenue				16,120
Rent Revenue				78,000
Interest Expense		0
Salaries and Wages Expense		18,200

An analysis of the accounts shows the following.

1.		The equipment depreciates $364 per month.
2.		Half of the unearned rent revenue was earned during the quarter.
3.		Interest of $520 is accrued on the notes payable.
4.		Supplies on hand total $1,105.
5.		Insurance expires at the rate of $520 per month.

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.

Answer 1

Date	General Journal	Debit	Credit
March 31	Depreciation expense	$1,092
	Accumulated depreciation- Equipment		$1,092
	( To record depreciation expense)
March 31	Unearned rent revenue	$8,060
	Rent revenue		$8,060
	( To record rent revenue)
March 31	Interest expense	$520
	Interest payable		$520
	( To record interest expense)
March 31	Supplies expense	$2,795
	Supplies		$2,795
	( To record supplies expense)
March 31	Insurance expense	$1,560
	Prepaid insurance		$1,560
	( To record insurance expense)

(i) Monthly Depreciation expense = $364

Quarterly depreciation expense = 364 x 3

= $1,092

(ii) Unearned rent revenue earned = 16,120 x 1/2

= $8,060

(iii) Supplies expense = Unadjusted supplies - Ending supplies

= 3,900-1,105

= $2,795

(iv) Insurance expense = $520 per month

Quarterly insurance expense = 520 x 3

= $1,560