Chapter 2
Timberline Lodge
The accounting records of Timberline Lodge are maintained on the basis of a fiscal year ending
April 30. The facts listed below are to be used for making adjusting entries at April 30, 20X1.
Required: Prepare the adjusting entries needed by Timberline Lodge on April 30, 20X1.
(a)
A bank loan in the amount of $200,000 was obtained on April 1, 20X1, by issuing a 15%
note payable due in three months. No interest has been paid or recorded.
Interest Expense 2,500
(200,000*.15*1/12)
Interest Payable 2,500
(b)
A portion of the land owned by Timberline had been leased on April 16, 20X1, to a
service state operator at a yearly rental of $12,000. One year’s rent was collected in
advance at the date of the lease and credited to Unearned Rental Revenue. The lease
runs from April 16, 20X1 through April 15, 20X2.
Unearned Rental Revenue 500
Revenue 500
(c)
A bus to carry guests to and from the airport had been rented beginning early on April
19 from Truck Rentals, Inc., at a daily rate of $60. No rental payment has yet been made
although the bus has been used for 12 days in April.
Rent Expense 720
Rent payable 720
(d)
A one-year fire insurance policy was purchased by Timberline on April 1, 20X1. The
premium of $18,000 for the life of the policy was paid in full on April 1 and recorded as
Unexpired Insurance. No entry has yet been made for the one-month period of
coverage that has expired.
Insurance expense 1,500
Prepaid Insurance 1,500
(e)
Equipment was acquired some years ago at a cost of $36,000. Depreciation for the year
ending April 30, 20X1, is based on an assumed useful life of 6 years.
Depreciation Expense 6,000
Accumulated Depreciation of equipment 6,000
Check figures (key amounts):
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Chapter 2
(a)
(b)
(c)
(d)
(e)
$2,500
$500
$720
$1,500
$6,000
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