Question

E3-7 The ledger of Passehl Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. no te to Credita Debit $ 3,600 2,800 25,000 Prepaid Insurance T BC Supplies Equipment Accumulated Depreciation Equipment S Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense Salaries and Wages Expense $ 8,400 20,000 10,200 60,000 ontled -O- 14,000 An analysis of the accounts shows the following. 1. The equipment depreciates $400 per month. 2. One-third of the unearned rent revenue was earned during the quarter. 3. Interest of $500 is accrued on the notes payable. 4. Supplies on hand total $750. 5. Insurance expires at the rate of $300 per month. Instructions Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense. Interes Payable, and Supplies Expense.

Answer 1

Date	General Journal	Debit	Credit
March 31	Depreciation expense	$1,200
	Accumulated depreciation- Equipment		$1,200
	( To record depreciation expense)
March 31	Unearned rent revenue	$3,400
	Rent revenue		$3,400
	( To record unearned rent revenue)
March 31	Interest expense	$500
	Interest payable		$500
	( To record interest expense)
March 31	Supplies expense	$2,050
	Supplies		$2,050
	( To record supplies expense)
March 31	Insurance expense	$900
	Prepaid insurance		$900
	( To record insurance expense)

1.

Depreciation expense for 3 months = Depreciation expense per month x 3

= 400 x 3

= $1,200

2.

Rent revenue earned = Unearned rent revenue x 1/3

= 10,200 x 1/3

= $3,400

4.

Supplies expense = Supplies beginning - Supplies ending

= 2,800-750

= $2,050

5.

Insurance expense for 3 months = Insurance expense per month x 3

= 300 x 3

= $900

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