Question

Terry Mason organized The Fifth Season at the beginning of February 20Y4. During February, The Fifth Season entered into the following transactions: Terry Mason invested $32,375 in The Fifth Season in exchange for common stock. Paid $5,250 on February 1 for an insurance premium on a 1-year policy. Purchased supplies on account, $2,820. Received fees of $47,200 during February. Paid expenses as follows: wages, $18,600; rent, $3,100; utilities, $1,550; and miscellaneous, $1,705. Paid dividends of $8,175. The transactions above have already been recorded in the integrated financial statement framework below. Record the adjusting entries at the end of February to record the insurance expense and supplies expense. There was $2,115 of supplies on hand as of February 28. Identify the adjusting entry for insurance as (a1) and supplies as (a2). Use the integrated financial statement framework below. After each transaction, enter a balance for each item. If an amount box does not require an entry, leave it blank. If required, round your answer to the nearest dollar. Enter account decreases as negative amounts. Statement of Cash Flows Balance Sheet Assets = Liabilities + Stockholders' Equity Cash + Supplies + Prepaid Insurance = Accounts Payable + Common Stock + Retained Earnings a. Investment 32,375 32,375 b. Paid insurance –5,250 5,250 Balances 27,125 5,250 32,375 c. Purchased supplies 2,820 2,820 Balances 27,125 2,820 5,250 2,820 32,375 d. Fees earned 47,200 47,200 Balances 74,325 2,820 5,250 2,820 32,375 47,200 e. Paid expenses –24,955 –24,955 Balances 49,370 2,820 5,250 2,820 32,375 22,245 f. Paid dividends -8,175 -8,175 Balances 41,195 2,820 5,250 2,820 32,375 14,070 a1. Insurance expense 0 0 0 0 Balances 41,195 2,820 2,820 32,375 a2. Supplies expense 0 -705 0 0 0 -705 Balances, February 28 41,195 2,115 2,820 32,375 Statement of Cash Flows Income Statement a. Financing $32,375 d. Fees earned $47,200 b. Operating -5,250 e. Wages expense -18,600 d. Operating 47,200 e. Rent expense -3,100 e. Operating -24,955 e. Utilities expense -1,550 f. Financing -8,175 e. Miscellaneous expense -1,705 Increase in cash $41,195 a1. Insurance expense a2. Supplies expense -705 Net income $

Answer 1

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	Cash	Supplies	Prepaid Insurance	Accounts Payable	Common Stock	Retained Earning
a. Investment	32375				32375
Balances	32375	0	0	0	32375	0
b. Paid Insurance	-5250		5250
Balances	27125	0	5250	0	32375	0
c. Supplies Purchase		2820		2820
Balances	27125	2820	5250	2820	32375	0
d. Fees Earned	47200					47200
Balances	74325	2820	5250	2820	32375	47200
e. Paid Expense	-24955					-24955
Balances	49370	2820	5250	2820	32375	22245
f. Paid Dividend	-8175					-8175
Balances	41195	2820	5250	2820	32375	14070
a1. Insurance Expense			-438			-438
Balances	41195	2820	4812	2820	32375	13632
a2. Supplies Expense		-705				-705
Balances Feb 28	41195	2115	4812	2820	32375	12927
Adjusting Entries:
a1 Insurance	Insurance is for one year i.e. 12 months $ 5250.
	Amount for one month (February)	5250/12	$438
	Entry will be:
	Insurance Expense	Debit	$438
	Prepaid Insurance	Credit	$438
a2 Supplies	Supplies Purchased	$2,820
	Less: Supplies in hand	$2,115
	Supplies Consumed	$705
	Entry will be:
	Supply Expense	Debit	$705
	Supplies	Credit	$705
Fees Earned		$47,200
Less:
Wages	$18,600
Rent	$3,100
Utilities	$1,550
Misc	$1,705
Insurance Expense	$438
Supplies Expense	$705	$26,098
Net Income		$21,102