Question

P5.5. Eunice Hospital's preadjusted trial balance at December 31, 20x1, included the following accounts, among others: Acct. No. -O- 80,000 -0- 107 108 109 202 203 204 250 601 604 606 608 Prepaid insurance Prepaid rent Prepaid interest Notes Payable Accrued interest payable Accrued salaries and wages payable Bonds payable Salaries and wages expense Insurance expense Rent expense Interest expense 100,000 399,500 5,760 2,700 4,800 The following additional information is available: 1. A three-year insurance premium was prepaid on January 1, 20X1. 2. One year's rent was paid in advance on June 1, 20X1. 3. On December 1, 20x1, an $80,000, 12 percent, six-month loan was obtained from a local bank; interest was prepaid. 4. Unpaid salaries and wages at December 31, 20x1, amounted to $27,400. 5. On April 1, 20x1, $100,000 of 6 percent, 15-year bonds were issued at face value. Interest on these bonds is payable annually on April 1, beginning April 1, 20X2. Required: Prepare, in general journal form, the necessary adjusting entries at December 31, 20X1.

Answer 1

1. Prepaid Insurance Dr 3840

To Insurance Account 3840

Prepaid Insurance of 5760 is for 3 years so Prepaid Insurance for 2 years will be 5760 / 3 x 2 = 3840

2.Prepaid Rent Dr 1125

To Rent Account 1125

Rent paid in advance for 1 year on 1st June 2700 so 5 months rent will be advance so 2700 / 12 x 5 = 1125

3.Prepaid Interest Dr 4000

To Interest Account 4000

Interest paid in advance for 6 months so 4800 / 6 x 5 =4000

4.Salary & Wages Account Dr 27400

To Accrued Salary & Wages Payable 27400

5.Interest on bonds Account Dr 4500

To Accrued Interest Payable 4500

100000 x 6 / 100 x 9 /12 = 4500