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Certain of the accounts in Gateway Hospitals preadjusted trial balance at December 31, 20X6, are as follows: Acct. No. 102 Temporary investments $ 60,000 103

Certain of the accounts in Gateway Hospitals preadjusted trial balance at December 31, 20X6, are as follows:

Acct. No.

102 Temporary investments $ 60,000

103 Accrued interest receivable -0-

104 Accounts receivable 940,000

105 Allowance for uncollectible accounts 3,000

107 Prepaid insurance 1,800

120 Land 50,000

130 Buildings 4,000,000

131 Accumulated depreciationbuildings 450,000

140 Equipment 1,900,000

141 Accumulated depreciationequipment 750,000

203 Accrued interest payable -0-

205 Deferred rental income 3,000

250 Bonds payable 100,000

403 Interest income 2,875

404 Rental income 1,780

501 Contractual adjustments 71,300

502 Charity care adjustments 56,290

604 Insurance expense 11,450

607 Depreciation expense -0-

608 Interest expense 9,230

609 Bad debt expense -0-

The following additional information is available:

1. The hospitals temporary investments consist of $60,000 (face value) of 8 percent bonds that were acquired on October 1, 20X7. These bonds pay interest annually on October 1, commencing October 1, 20X7.

2. Account 105 is used only for estimated bad debts; charity care adjustments and contractual adjustments are charged directly to accounts 502 and 501, respectively. The $3,000 credit balance in account 105 here represents the excess of estimated bad debts at December 31, 20X5, over the actual bad debts written off during 20X6. It is estimated that all of the December 31, 20X6, accounts receivable are collectible except for 5 percent that probably will prove to be bad debts.

3. Account 107 includes a three-year insurance premium paid in advance on June 1, 20X6.

4. The hospital building, which was acquired on January 1, 20X1, has an estimated useful life of 40 years and an expected 10 percent salvage value.

5. All the equipment was acquired on January 1, 20X1. It has an estimated useful life of 12 years and a $100,000 salvage value.

6. Account 202 represents the face amount of a 12 percent, six month bank loan obtained by the hospital on November 1, 20X6. Interest on the note was not prepaid.

7. Account 205 represents a years rent received in advance on March 1, 20X6.

Required: Prepare, in general journal form, the necessary adjusting entries for December 31, 20X6.

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