Question

The ledger of Sagovic Rental Agency on March 31 of the current year includes the selected accounts on page 206 before adjusting entries have been prepared. Debits Credits.

Prepaid Insurance ($3600),
Supplies ($3000),
Equipment ($25,000),
Accumulated Depreciation-Equipment (Credit: $8,400),
Notes Payable (Credit: $20,000),
Unearned Rent Revenue (Credit: $12,400),
Rent Revenue (Credit: $60,000),
Interest Expense $0,
Salaries and Wages Expense ($14,000).
An analysis of the accounts shows the following.
1. The equipment depreciates $280 per month.
2. Half of the unearned rent revenue was earned during the quarter.
3. Interest of $400 is accrued on the notes payable.
4. Supplies on hand total $850.
5. Insurance expires at the rate of $400 per month.
Prepare the adjusting entries on March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

Answer 1

Sagovic Rental Agency

Adjusting Journal Entries:

1. Debit Depreciation Expense $840

Credit Accumulated Depreciation $840

To record depreciation expense for the quarter at $280 per month.

2. Debit Unearned Rent Revenue $6,200

Credit Rent Revenue $6,200

To record the half of earned rent revenue during the quarter.

3. Debit Interest Expense $400

Credit Interest Payable $00

To accrue interest expense for the quarter.

4. Debit Supplies Expense $2,150

Credit Supplies $2,150

To record supplies expense for the quarter.

5. Debit Insurance Expense $1,200

Credit Prepaid Insurance $1,200

To record insurance expense for 3 months at $400 per month.

Step-by-step explanation:

a. Data:

Debits Credits.

Prepaid Insurance ($3600),

Supplies ($3000),

Equipment ($25,000),

Accumulated Depreciation-Equipment (Credit: $8,400),

Notes Payable (Credit: $20,000),

Unearned Rent Revenue (Credit: $12,400),

Rent Revenue (Credit: $60,000),

Interest Expense $0,

Salaries and Wages Expense ($14,000).

b. The adjusting entries are made in the books of Sagovic Rental Agency in order to harmonize the accounts with the period's expenses and revenues in line with the accrual and matching principles of generally accepted accounting principles.