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Question No.1985

Hill Company adjusts its accounts at the end of each month-01985

Online Quiz This subjective question is related to the book/course vu mgt411 Money & Banking. It can also be found in vu mgt411 Mid Term Solved Past Paper No. 6.

Question 1: Hill Company adjusts its accounts at the end of each month. Prepare the adjusting entries required at December 31 based on the following information.
  1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to Rs. 1,050. No interest expense has yet been recorded.
  2. Depreciation of the office equipment is based on an estimated life of five years. The balance in the office equipment account is Rs. 24,000; no change has occurred in the account during the year.
  3. Interest revenue earned on US government bonds during December amounts to Rs. 750. This accrued interest revenue has not been recorded or received as of December 31.
  4. On December 31, an agreement was signed to lease a truck for 12 months beginning January 1 at a rate of 35 cents per mile. Usage is expected to be 2,000 miles per month, and the contract specifies a minimum payment equivalent to 18,000 miles a year.
Answer:
  1. Interest Expense A/C 1050
  2. Accrued interest A/C 1050
  3. Depreciation expense 4800
  4. To accumulated deprecation 4800
  5. Interest Receivable on Bonds A/C 750
  6. Interest Income on Bonds A/C 750
  7. OR
  8. accrued interest 750
  9. interest income 750
  10. Accrued lease rent 630,000
  11. Lease rent 630,000

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