Question

1. The information given below for Hasan General Suppliers provides a basis for making all necessary adjusting entries at December 31, the end of the firm’s fiscal year. You may assume that all transactions were properly recorded in accordance with the firm’s accounting policies.

1. On June 1, the company borrowed Rs. 600,000 at an interest rate of 19% payable on quarterly basis.
2. The firm owns a building with an estimated economic life of 25 years. The cost was Rs. 1,500,000. A uniform depreciation is provided every year.
3. On October 1 the firm paid Rs. 27,000 for three years of insurance coverage commencing on that date. The unexpired insurance account was debited.
4. A nominal account was credited when Rs. 36,000 in rental revenue was received from a tenant on November 1. This amount represented six months’ rent in advance.
5. Wapda Bonds with a face value of Rs. 10,000 and an annual interest rate of 13% were purchased as an investment on May 1. Interest payment dates are April 1 and October 1.
6. An annual business licence of Rs. 4,000 was paid on October 1 and recorded by debiting a nominal account.

Required

1. Prepare the necessary adjusting entries at December 31. Include in the explanation of each entry any calculations you performed in developing the adjusting entry.

Answer 1