Question

Exercise 3-5

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

		Debit			Credit
Prepaid Insurance		$3,372
Supplies		2,804
Equipment		23,330
Accumulated Depreciation-Equipment					$8,217
Notes Payable					20,880
Unearned Rent Revenue					4,080
Rent Revenue					56,130
Interest Expense		–0–
Salaries and Wages Expense		13,600

An analysis of the accounts shows the following.

1.		The equipment depreciates $244 per month.
2.		One-third of the unearned rent was earned as revenue during the quarter.
3.		Interest of $450 is accrued on the notes payable.
4.		Supplies on hand total $650.
5.		Insurance expires at the rate of $281 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. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.
4.
5.

Answer 1

The adjusting journal entries to be booked will be as under:

Date	Account Description	Debit($)	Credit($)	Working	Rationale
1	Depreciation Expense	732		244*3	Depreciation expense will be booked and accumulated depreciation will increase
	Accumulated Depreciation		732
2	Unearned Rent Revenue	1,360		4080/3	Rent revenue will be booked and Unearned Rent Revenue liability account will be reduced
	Rent Revenue		1,360
3	Interest Expense	450		given	Expense incurred but not paid, a liability will be booked for the same
	Interest Payable		450
4	Supplies Expense	2,154		2804-650	Supplies consumed/used during the period are booked as expense
	Supplies		2,154
5	Insurance Expense	843		281*3	Insurance expired will be booked as expense and reduced from Prepaid insurance
	Prepaid Insurance		843

Please comment in case of any issue and I will be happy to help.