Depreciation on equipment is $800 for the accounting period. 2. There was no beginning balance of supplies and $768 of supplies were purchased during the period. At the end of the period $108 of supplies were on hand. 3. Prepaid rent had a $1,180 normal balance prior to adjustment. By year end $246 was unexpired. Prepare adjusting entries for the above transactions.

Answer and Explanation:

The adjusting entries are shown below:

1. Depreciation expense Dr $800

             To Accumulated depreciation - equipment $800

(Being depreciation expense is recorded)

For recording this we debited the depreciation expense as it increased the expenses and reduced the assets so accumulated depreciation is credited

2. Supplies expense Dr $660   ($768  - $108)

             To Supplies $660

(Being the supplies expense is recorded)

For recording this we debited the supplies expense as it increased the expenses and reduced the assets so supplies is credited

3. Rent expense Dr $934    ($1,180 - $246)

         To prepaid rent $934

(Being the rent expense is recorded)

For recording this we debited the rent expense as it increased the expenses and reduced the assets so prepaid rent is credited

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return

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