Question

The ledger of Greene Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. Credit Debit $ 2,700 2,100 18,750 Prepaid Insurance Supplies Equipment Accumulated Depreciation - Equipment Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense Salaries and Wages Expense $ 6,300 15,000 6,975 45,000 -0- 10,500 An analysis of the accounts shows the following. 1. The equipment depreciates $188 per month. 2. One-third of the unearned rent was recognized as revenue during the quarter. 3. Interest of $350 is accrued on the notes payable. 4. Supplies on hand total $637. 5. Insurance expires at the rate of $225 per month. Required: Prepare the adjusting journal entries at March 31, assuming that the company prepares its adjusting entries quarterly. Additional accounts that you will use include: Depreciation Expense; Insurance Expense; Interest Payable; and Supplies Expense. [Note: In this problem, be sure to prepare adjusting journal entries (i.e., in journal entry form) and not simply T-accounts --- even though you might use T-accounts to help you analyze some of these adjusting entries.]

Answer 1

Transaction	General Journal	Debit	Credit
1	Depreciation expense	$564
	Accumulated depreciation- equipment		$564
	( To record depreciation expense)
2	Unearned rent	$2,325
	Rent revenue		$2,325
	( To record unearned rent revenue)
3	Interest expense	$350
	Interest payable		$350
	( To record interest expense)
4	Supplies expense	$1,463
	Supplies		$1,463
	( To record supplies expense)
5	Insurance expense	$675
	Prepaid insurance		$675
	( To record insurance expense)

1. Monthly depreciation of equipment = $188

Hence, quarterly depreciation of equipment = 188 x 3

= $564

2. Rent revenue earned = 6,975 x 1/3

= $2,325

4. Supplies expense = Beginning supplies - Ending supplies

= 2,100-637

= $1,463

5. Insurance expense = $225 per month

Hence, quarterly insurance expense = 225 x 3

= $675

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