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E3-7 The ledger of Piper Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.
Debit CreditPrepaid Insurance $ 3,600 Supplies 2,800 Equipment 25,000 Accumulated Depreciation—Equipment $ 8,400 Notes Payable 20,000 Unearned Rent 9,900 Rent Revenue 60,000 Interest Expense –0– Wages Expense 14,000 An analysis of the accounts shows the following. 1. The equipment depreciates $400 per month. 2. One-third of the unearned rent was earned during the quarter. 3. Interest of $500 is accrued on the notes payable. 4. Supplies on hand total $700. 5. Insurance expires at the rate of $200 per month.
Instructions 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 Expense.
The adjusting entries are as follows:
To record the quarterly depreciation expense (400*3=$1200) for equipment
To record one third of the unearned rent, as now earned (9900/3=$3300)
To record the quarterly accrual of interest that is payable on the notes
To record the quarterly usage of supplies, with a balance of (2800-2100)$700 left on account
To record the insurance expense of 200*3=$600 for the quarter, and reduce the prepaid insurance by the same amount