Question
In: Accounting
1. Dodie Company completed its first year of operations on December 31. All of the year's...
1. Dodie Company completed its first year of operations on December 31. All of the year's entries have been recorded except for the following:
a. At year-end, employees earned wages of $4,000, which will be paid on the next payroll date in January of next year.
b. At year-end, the company had earned interest revenue of $1,500. The cash will be collected March 1 of the next year.
2. A+T Williamson Company is making adjusting entries for the year ended December 31 of the current year. In developing information for the adjusting entries, the accountant learned the following:
a. A two-year insurance premium of $4,800 was paid on October 1 of the current year for coverage beginning on that date. The bookkeeper debited the full amount to Prepaid Insurance on October 1.
b. At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supporting documents.
| Shipping supplies on hand, January 1 of the current year | $ | 13,000 | |
| Purchases of shipping supplies during the current year | 75,000 | ||
| Shipping supplies on hand, counted on December 31 of the current year | 20,000 | ||
Required:
For each of the transactions in Dodie Company and A+T Williamson Company, indicate the amount and the direction of effects of the adjusting entry on the elements of the balance sheet and income statement. (Enter negative amounts with a minus sign.)
Solutions
Expert Solution
Following will be the amounts and direction of effects of the adjusting entry on the elements of the balance sheet and income statement.
| Balance sheet | Income statement | |||||
| Transaction | Assets | Liabilities | Stockholders' equity | Revenue | Expenses | Net income |
| 1a | 4,000 | - 4,000 | 4,000 | - 4,000 | ||
| 1b | 1,500 | 1,500 | 1,500 | 1,500 | ||
| 2a | - 600 | - 600 | 600 | - 600 | ||
| 2b | - 68,000 | - 68,000 | 68,000 | - 68,000 | ||
2a) Insurance expense for 3 months = 4,800 x 3/24
= $600
2b) Supplies expense = Beginning supplies + Supplies purchased - Ending supplies
= 13,000 + 75,000 - 20,000
= $68,000
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