Question

Use the following information to prepare adjusting entries for Gilbert Holdings:

On April 1, 2019, Gilbert Holdings signed a 4.30% bank loan due in 4 years. This is the only outstanding note payable.

Prepaid insurance represents a 4-month insurance policy purchased on December 1.

On October 1, 2019, Gilbert Holdings paid $11,880 for a 9-month lease for office space.

Unearned revenue represents a 12-month contract for consulting services. The payment was received on July 1, 2019.

Supplies on hand total $10,480.

Equipment is depreciated on a straight-line basis; residual value is estimated to be $15,000 with an estimated service life of 10 years. The assets were held the entire year.

On November 1, Gilbert Holdings issued Monroe Supplies an 3-month note receivable at a 8.2% annual interest rate.

The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The aging schedule of accounts receivable must be completed to determine management's desired balance for 2019.

Accrued wages totaling $35,838 were unpaid and unrecorded at December 31, 2019.

Utility costs incurred but unrecorded for the month of December were estimated to be $2,561.

Assumptions that can be made:

	Unadjusted
Account Title	Trial Balance
	DR	CR
Cash	67,188
Accounts Receivable	265,584
Allowance for Doubtful Accounts		11,194
Interest Receivable
Note Receivable	113,180
Merchandise Inventory	194,172
Prepaid Insurance	7,128
Prepaid Rent	11,880
Supplies	30,096
Equipment	277,464
Accumulated Depreciation - Equipment		29,304
Accounts Payable		27,746
Salaries & Wages Payable
Unearned Revenue		32,000
Interest Payable
Utilities Payable
Note Payable (final payment due 2023)		188,100
Common Stock		145,200
Retained Earnings		224,400
Dividends	64,680
Sales		2,773,980
Consulting Revenue
Sales Returns and Allowances	15,840
Sales Discounts	34,056
Cost of Goods Sold	1,888,788
Salaries & Wages Expense	430,056
Depreciation Expense - Equipment
Bad Debt Expense
Insurance Expense
Rent Expense
Supplies Expense
Utilities Expense	31,812
Interest Revenue
Interest Expense
	3,431,924	3,431,924
Net Income

Answer 1

Adjustment journal entries
Date	Account Titles	Debit	Credit
Dec.31,2019	Interest Expense	$6,066.00
	Interest Payable		$6,066.00
Dec.31,2019	Insurance Expense	$1,782.00
	Prepaid Insurance		$1,782.00
Dec.31,2019	Rent Expense	$3,960.00
	Prepaid Rent		$3,960.00
Dec.31,2019	Unearned Revenue	$16,000.00
	Consulting Revenue		$16,000.00
Dec.31,2019	Supplies Expense	$19,616.00
	Supplies		$19,616.00
Dec.31,2019	Depreciation Expense	$26,246.00
	Accumulated Depreciation - Equipment		$26,246.00
Dec.31,2019	Interest Receivable	$1,547.00
	Interest Income		$1,547.00
Dec.31,2019	Salaries and Wages Expense	$35,838.00
	Salaries and Wages Payable		$35,838.00
Dec.31,2019	Utilities Expense	$2,561.00
	Utilities Payable		$2,561.00
Working
Interest Expense on Note payable = [$188100 x 4.30% /12 months] x 9 months = $6066
Depreciation expense = [Cost - residual value]/useful life = [$277464 - $15000]/10 = $26246
Interest Income on Note Receivable = [$113180 x8.20%/12 months] x 2 months = $1547
Note : Bad debt expense can not booked as information give is not complete.