E3-7 The ledger of Passehl Rental Agency on March 31 of the current year include

Question

E3-7 The ledger of Passehl Rental Agency on March 31 of the current year includes the selected accounts, shown below, before adjusting entries have been prepared. Credit Prepaid Insurance Supplies Equipment Accumulated Debit $ 3,600 2,800 25,000 Depreciation-Equipment Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense Salaries and Wages Expense $ 8,400 20,000 10,200 60,000 14,000 An analysis of the accounts shows the following. 1. The equipment depreciates $400 per month. 2. One-third of the unearned rent revenue was earned during the quarter.

Explanation / Answer

Adjusting entry :

Date accounts & explanation debit credeit Mar 31 Depreciation expense (400*3) 1200     Accumlated depreciation-equipment 1200 (To record depreciation) Mar 31 Unearned rent revenue 3400      Rent revenue (10200/3) 3400 (To record rent revenue earned)

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