On January 1, 2025, a new Board of Directors was elected for Bradley Hospital. The new board switched to a different accountant. After reviewing the hospital’s books, the accountant decided that the accounts should be adjusted. Effective January 1, 2025, the board decided that

1. Separate funds should be established for the General Fund, the Bradley Endowment Fund, and the Plant Replacement and Expansion Fund (the old balances will be reversed to eliminate them).

2. The accounts should be maintained in accordance with fund accounting principles. The balances in the general ledger at January 1, 2025, are presented here:

The following additional information is available:

1. Under the terms of the will of J. Ethington, founder of the hospital, “The principal of the bequest is to be fully invested in trust forevermore in mortgages secured by productive real estate in Central City and/or in U.S. Government securities . . . and the income therefrom is to be used to defray current expenses.”

2. The Endowment Fund consists of the following:

3. The land account balance is composed of

4. The building balance is composed of

The estimated useful lives of the hospital building and the elevator when new were 50 years (9 years remaining) and 20 years (5 years remaining), respectively.

5. The hospital’s equipment was inventoried on January 1, 2025. The costs shown in the inventory agreed with the equipment account balance in the general ledger. The allowance for depreciation account at January 1, 2025, included $158,250 applicable to equipment, and that amount was determined to be accurate. All depreciation is computed on a straight- line basis.

6. A bank loan was obtained to finance the cost of new operating room equipment purchased in 2021. Interest was paid to December 31, 2024.

7. Common stock with a market value of $417,000 was donated to Bradley Hospital with the stipulation that the proceeds from the sale of the stock must be used for facilities expansion. The hospital plans to undertake expansion of its facilities next year and to sell these securities at that time.

Required:

Using the workpaper form below, prepare the entries necessary to establish the correct balances as of January 1, 2025.

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Cash Investment in U.S. treasury bills Investment in common stock Interest receivable Accounts receivable Inventory Land Building Equipment Allowance for depreciation Accounts payable Bank loan Endowment fund balance Other fund balances Total $ 50,000 105,000 417,000 4,000 40,000 25,000 407,000 245,000 283,000 $1,576,000 $376,000 70,000 150,000 119,500 860,500 $1,576,000