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.
using 20x4 as the base year prepare a trend analysis for the following data and tell whether the results suggest a favorable or unfavorable trend. round your answers to one decimal place
20x6 20x5 20x4
net sales 158,000 136,000 112,000
accounts receivable (net)43,000 (20x6) 32,000 (20x5) 21,000 (20x4)
To prepare the adjusting entries at March 31, we need to consider the following information given:
1. Equipment depreciation: The equipment depreciates $400 per month. Since adjusting entries are made quarterly, the depreciation expense for three months would be $400 x 3 = $1,200. We need to debit Depreciation Expense and credit Accumulated Depreciation—Equipment for $1,200.
2. Unearned rent earned: One-third of the unearned rent was earned during the quarter. To determine the amount earned, we need to divide the unearned rent by three: $9,900 / 3 = $3,300. We need to debit Unearned Rent and credit Rent Revenue for $3,300.
3. Accrued interest: Interest of $500 is accrued on the notes payable. We need to debit Interest Expense and credit Interest Payable for $500.
4. Supplies on hand: Supplies on hand total $700. We are given Supplies as an account, so we need to adjust it accordingly. We will subtract the supplies on hand from the initial amount given: $2,800 - $700 = $2,100. We need to debit Supplies Expense and credit Supplies for $2,100.
5. Insurance expense: Insurance expires at the rate of $200 per month. Since adjusting entries are made quarterly, the insurance expense for three months would be $200 x 3 = $600. We need to debit Insurance Expense and credit Prepaid Insurance for $600.
Based on the above information, the adjusting entries at March 31 are as follows:
Adjusting entry 1:
Debit: Depreciation Expense $1,200
Credit: Accumulated Depreciation—Equipment $1,200
Adjusting entry 2:
Debit: Unearned Rent $3,300
Credit: Rent Revenue $3,300
Adjusting entry 3:
Debit: Interest Expense $500
Credit: Interest Payable $500
Adjusting entry 4:
Debit: Supplies Expense $2,100
Credit: Supplies $2,100
Adjusting entry 5:
Debit: Insurance Expense $600
Credit: Prepaid Insurance $600