Clallam Country Hospital\'s post closing trial balance at December 31, 20X6, is
ID: 2475170 • Letter: C
Question
Clallam Country Hospital's post closing trial balance at December 31, 20X6, is attached. Clallam is a government nonprofit hospital. However, it has not maintained its books in conformity with the proper accounting priciples for hospital fund accounting. Effective January 1, 20X7, Clallam's Board of Trustees voted to adjust the December 31, 20X6, general ledger balances and to establish separate funds for General Funds, the Endowment Fund, and the Plant Replacement and Expansion Fund.
Additional information about the hospital accounts is attached.
REQUIRED (1) Prepare, in proper general journal form, ajusting entries necessary to restate properly the accounts given in the trial balance. Show all supporting computations in good form. Provide a brief explanation for your entry.Use the number of the transaction as the date.
(2) Prepare, in proper general journal form, entries to distribute the adjusted account balances to funds that the hospital should report in financial statements prepared in conformity with the fund accounting required bt the Board of Trustees and appropriate generally accepted accounting principles. Omit explanations.
(1) Investment in corporate bonds pertains to the amount required to be accumulated under a board policy to invest cash equal to accumulated depreciation until the funds are needed for asset replacement. The $500,000 balance at December 31, 20X5, is less than the full amount required because of errors in computation of building depreciation for past years. Included in the allowance for depreciation is a correctly computed amount of $90,000 applicable to equipment. (2) Endowment fund balance has been credited with the following Donor's bequest of cash $300,000 Gains on sales of securties 100,000 Interest and dividends earned in 20X4, 20X5, and 20X6 120,000 Total $520,000 The terms of the bequest specify that the principal, plus all gains on sales of investments, is to remain fully invested in U.S. government or corporate securities. At December 31, 20X6, $400,000 was invested in U.S. Treasury bills. The bequest further specifies that interest and dividends earned on investment are to be used for payment of current opreating expenses. (3) The Land account is made up of the following items. Donation of land in 20X0, at appraised value $40,000 Appreciation in fair value of land as determined by independent appraiser in 20X6 60,000 Total $100,000 (4) The Building account is made up of the following items. Hospital building completed 40years ago, when operations were started (estimated useful life, 50 year), at cost $ 720,000 Installation of elevator 20 years ago(estimated useful life, 20years), at cost 80,000 Total $ 800,000Explanation / Answer
1) Equipment A/c Dr. $90,000
Depreciation A/c $90,000
2) Cash A/c Dr. $ $520,000
To Donors bequest of cash $300,000
To Gain on sale of securities $100,000
To Interest on Investment $120,000
3) Building A/c Dr. 100000
To Donations for Building $40000
To Revaluation of Building $60000
4) Building Cost is correctly incorporated.
(II) Cash $620,000
Equipment $ 260,000
Building $ 800,000
Accumulated depreciation $ 320,000