Question

The ledger of Pina Colada Corp. on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared. Debit Credit Supplies $3,600 Prepaid Insurance 4,320 Equipment 30,000 Accumulated Depreciation Equipment $10,080 Notes Payable 24,000 Unearned Rent Revenue 14,880 Rent Revenue 72,000 Interest Expense Salaries and Wages Expense 16,800 An analysis of the accounts shows the following. 1. The equipment depreciates $336 per month. 2. Half of the unearned rent revenue was earned during the quarter. 3. Interest of $480 is accrued on the notes payable. 4. Supplies on hand total $1,020. 5. Insurance expires at the rate of $480 per month.

Answer 1

Journal

Date	Account title	Debit	Credit
March 31	Depreciation expense	1,008
	Accumulated depreciation - Equipment		1,008
	(To record quarterly Depreciation expense)
March 31	Unearned rent revenue	7,440
	Rent revenue		7,440
	(To record Rent revenue earned)
March 31	Interest expense	480
	Interest payable		480
	(To record interest expense)
March 31	Supplies expense	2,580
	Supplies		2,580
	(To record Supplies expense)
March 31	Insurance expense	1,440
	Prepaid insurance		1,440
	(To record Insurance expense)

i)

Depreciation expense = $336 per month

Quarterly Depreciation expense = 336 x 3

= $1,008

ii)

Rent revenue earned = 14,880 x 1/2

= $7,440

iii)

Supplies expense = Supplies beginning - Supplies ending

= 3,600 - 1,020

= $2,580

iv)

Monthly Insurance expense = $480

Quarterly insurance expense = 480 x 3

= $1,440

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