The following data is assembled from the accounting records of Subhan Industries, Islamabad. a) The company borrowed Rs. 500,000 from the bank on November 01, 2019 issuing a Provisory Note which is payable after 03 months with an interest rate of 18%

To make the necessary adjusting journal entries for Subhan Industries on December 31, 2019, we will analyze each transaction and determine the appropriate adjustments: ### a) Loan Payable with Interest The company borrowed Rs. 500,000 with an interest rate of 18% per annum on November 01, 2019, and the loan is due after 3 months (i.e., on January 31, 2020). As of December 31, 2019, one month's interest needs to be accrued. **Calculation of Interest:** - Principal = Rs. 500,000 - Interest Rate = 18% p.a. - Time = 2 months (November and December) Interest for 2 months = Rs. 500,000 * (18/100) * (2/12) = Rs. 15,000 **Journal Entry:** ```plaintext Dr. Interest Expense Rs. 15,000 Cr. Interest Payable Rs. 15,000 ``` --- ### b) Prepaid Insurance Adjustment The company paid Rs. 136,000 for a fire insurance policy covering a period of 2 years (24 months), starting from October 1, 2019. By December 31, 2019, 3 months of coverage have been used. **Calculation of Monthly Insurance Expense:** - Total Insurance = Rs. 136,000 - Coverage Period = 24 months - Monthly Expense = Rs. 136,000 / 24 = Rs. 5,666.67 **Insurance Expense for 3 months = 3 * Rs. 5,666.67 = Rs. 17,000.01 (approximately Rs. 17,000)** **Journal Entry:** ```plaintext Dr. Insurance Expense Rs. 17,000 Cr. Prepaid Insurance Rs. 17,000 ``` --- ### c) Note Receivable Adjustment The note receivable of Rs. 600,000 was received from a customer on September 01, 2019, with a term of 6 months. By December 31, 2019, this note has not matured yet (it will mature on March 01, 2020), so no adjustment is needed for interest income at this point. **No journal entry needed.** --- ### d) Unearned Rent Revenue Adjustment The company collected Rs. 27,000 for rent for a period of 6 months starting from August 01, 2019. By December 31, 2019, 5 months of the rental period (August, September, October, November, December) have passed. **Rent Adjustment:** - Monthly Rent Revenue = Rs. 27,000 / 6 = Rs. 4,500 - Revenue Earned in 5 months = 5 * Rs. 4,500 = Rs. 22,500 **Journal Entry:** ```plaintext Dr. Unearned Rent Revenue Rs. 22,500 Cr. Rent Revenue Rs. 22,500 ``` --- ### Summary of Adjusting Entries 1. Interest Expense / Interest Payable: Rs. 15,000 2. Insurance Expense / Prepaid Insurance: Rs. 17,000 3. Note Receivable: No entry needed. 4. Unearned Rent Revenue / Rent Revenue: Rs. 22,500 These entries will ensure that Subhan Industries' accounting records reflect accurate financial information as of December 31, 2019.