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 0 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. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.

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andromache andromache · Answer 1 · 2019-10-01T14:16:07+02:00

Answer:

Explanation:

The adjusting entries are shown below:

1. Depreciation Expense A/c Dr $1,008 ($336 × 3 month)

To Accumulated Depreciation A/c

(Being depreciation expense is adjusted)

As quarter includes 3 months so we multiply it with the depreciation expense.

2. Unearned rent revenue A/c Dr $7,440

To Rent revenue $7,440

(Being unearned rent revenue is adjusted)

3. Interest expense A/c Dr $490

To Accrued interest payable A/c $490

(Being accrued interest is recorded on the notes payable)

4. Supplies Expense A/c Dr $2,575 ($3,600 - $1,020)

To Office supplies $2,575

(Being supplies are adjusted)

5. Insurance expense A/c Dr $1,440 ($480 × 3 month)

To Prepaid insurance A/c $1,440

(Being prepaid insurance is adjusted)