Question

Debit Credit

Supplies 700

Prepaid Insurance 2,400

Salaries and Wages Payable 800   

Unearned Service Revenue 750

Supplies Expense 950

Insurance Expense 400

Salaries and Wages Expense 1,800

Service Revenue 2,000

Answer the following questions , assuming the year beginning January 1 (Please prove an explanation)

(a) If the amount in Supplies Expense is the January 31 adjusting entry, and $850 of supplies was purchased in January, what was the balance in Supplies on January 1?

(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for 1 year, what was the total premium.

(c) If $2,500 of salaries was paid in January, what was the balance in Salaries Payable at December 31, 2009?

(d) If $1,800 was received in January for services performed in January, what was the balance in Unearned Service Revenue at December 31, 2009?

Answer 1

• Answer ‘a’         

-Beginning balance on Jan1 (?) + purchased ($850) – Consumed ($950) = Ending balance ($700)

Balance on jan1 = 700 + 950 – 850 = $800

-Answer = $ 800

• Answer ‘b’

Insurance expense = $ 400 is for 1 month.

Insurance is for 1 year (12 months)

Total premium = $ 400 x 12 = $ 4,800

Answer = $ 4,800

• Answer ‘c’

A	Salaries & Wages payable ending bal on Jan 31	$                                         800.00
B	Salaries paid in Jan	$                                     2,500.00
C	Salaries & wages expenses in Income Statement	$                                     1,800.00
D = A+B - C	Answer: Balance in Salaries & Wages payable on Dec 31, 2009	$                                     1,500.00

• Answer ‘d’

A	Unearned Service Revenue ending bal on Jan 31	$                                         750.00
B	Cash received for services other than Jan	$                                         200.00 [because question says $ 1800 is received for Jan services, while Service revenue shown balance of $ 2000]
D = A+B - C	Answer: Unearned Service revenue balance on Dec 31, 2009	$                                         950.00