Question

Al-Mustafa Lodges maintains its accounting records on the basis of a fiscal year ending June 30....

  1. Al-Mustafa Lodges maintains its accounting records on the basis of a fiscal year ending June 30. The following information is available as a basis for adjusting entries at June 30, 1997. Prepare a separate adjusting journal entry for each of the eight numbered paragraphs, which you believe to require an adjustment.
  1. Depreciation of the building for the year ended June 30 amounts to Rs. 141,250.
  2. A 36-month fire insurance policy had been purchased on June 1 of the current year. The premium of Rs. 36,000 for the entire life of the policy had been paid on June 1 and recorded as Unexpired insurance. The expense allocable to the year ended June 30 is Rs. 1,000.
  3. A portion of the land owned had been leased on June 16 of the current year to a service station operator at a yearly rental rate of Rs. 48,000. One year’s rent was collected in advance at the date of the lease and credited to Unearned rental revenue. Your adjusting entry should show that one-half of a month’s rent has been earned at June 30 and should reduce the Unearned rental revenue account accordingly.
  4. A small bus to carry guests to and from the airport had been rented early on June 19 from Tour Service (Pvt) Ltd at a daily rate of Rs. 300. No rental payment has yet been made and no accounting entry has been recorded.
  5. Among the assets owned by Al-Mustafa Lodge are government bonds with a face value of Rs. 250,000. Accrued interest receivable on the bonds at June 30 was computed to be Rs. 9,750.
  6. A bank loan in the amount of Rs. 1,000,000 had been obtained on June 1. No interest expense has yet been paid or recorded. Interest expense accrued to June 30 is Rs. 12,000.
  7. The company signed an agreement on June 30 of the current year to lease a truck form Awan Motors for a period of one year beginning July 1 at a rate of 2 rupees a mile and with a clause providing for a minimum monthly charge of Rs. 3,000. No payment has been made and no entry recorded in the accounting records.
  8. The last regular payday of Al-Mustafa Lodge was June 28. Since then, the salaries earned by employees but not paid amount to Rs. 33,000.
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