Question

The ledger of Shamrock, Inc. on March 31, 2022, includes the following selected accounts before adjusting entries.

Debit Credit
Supplies 2,780
Prepaid Insurance 2,240
Equipment 25,500
Unearned Service Revenue 14,700

An analysis of the accounts shows the following.

1. Insurance expires at the rate of $280 per month.
2. Supplies on hand total $890.
3. The equipment depreciates $170 per month.
4. During March, services were performed for two-fifths of the unearned service revenue.

Required:
Prepare the adjusting entries for the month of March.

Answer 1

Shamrock, Inc.

Adjusting Journal Entries:

1. Debit Insurance Expense $280

Credit Prepaid Insurance $280

To record insurance expense for the month.

2. Debit Supplies Expense $1,890

Credit Supplies $1,890

To record supplies expense for the month.

3. Debit Depreciation Expense - Equipment $170

Credit Accumulated Depreciation- Equipment $170

To record depreciation expense for the month.

4. Debit Unearned Service Revenue $5,880

Credit Service Revenue $5,880

To record earned service revenue for the month.

Step-by-step explanation:

a) Data:

Selected Accounts:

Debit Credit

Supplies 2,780

Prepaid Insurance 2,240

Equipment 25,500

Unearned Service Revenue 14,700

b) The above adjusting entries at the end of March are made by Shamrock in order to accurately recognize its revenue and expenses for the month of March. These entries are in line with the accrual concept and matching principle of generally accepted accounting principles. They require that revenues or expenses earned or incurred in a period be recognized and matched in the affected period, whether cash was exchanged or not.