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Mohammad Ali
Mohammad Ali, Accounts & Financial Advisor
Category: Finance
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Experience:  Qualified Cost & Management Accountant, with 2 years experience in Financial & Audit Services
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The Ledger Of Piper Rental Agency On March 31 Of The Current Year Incl

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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 Credit
Prepaid 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:

For depreciation

Description

Debit ($s)

Credit ($s)

Depreciation expense

Accumulated depreciation-Equipment

To record the quarterly depreciation expense (400*3=$1200) for equipment

1200

1200

For un-earned rent

Description

Debit ($s)

Credit ($s)

Un-earned rent

Rent revenue

To record one third of the unearned rent, as now earned (9900/3=$3300)

3300

3300

For interest payable

Description

Debit ($s)

Credit ($s)

Interest expense

Interest payable

To record the quarterly accrual of interest that is payable on the notes

500

500

For supplies

Description

Debit ($s)

Credit ($s)

Supplies expense

Supplies

To record the quarterly usage of supplies, with a balance of (2800-2100)$700 left on account

2100

2100

For insurance

Description

Debit ($s)

Credit ($s)

Insurance expense

Prepaid insurance

To record the insurance expense of 200*3=$600 for the quarter, and reduce the prepaid insurance by the same amount

600

600

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