Question

Aubrae Company is making adjusting entries for the year ended December 31, 2014. In developing information for the adjusting entries, the accountant learned the following:

   

a.	A two-year insurance premium of $7,200 was paid on October 1, 2014, for coverage beginning on that date.
b.	At December 31, 2014, the following data relating to Shipping Supplies were obtained from the records and supporting documents.

   

Shipping supplies on hand, January 1, 2014	$	15,500
Purchases of shipping supplies during 2014		61,000
Shipping supplies on hand, counted on December 31, 2014		18,000

3.

value:
1.00 points

Required information

Required:
1.	Record the adjusting entry for insurance at December 31, 2014, assuming that the premium was paid on October 1, 2014, and the bookkeeper debited the full amount to Prepaid Insurance. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

     

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4.

value:
1.00 points

Required information

2.	Record the adjusting entry for supplies at December 31, 2014, assuming that the purchases of shipping supplies were debited in full to Shipping Supplies. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

     

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5.

value:
1.00 points

Required information

3.	What amount should be reported on the 2014 income statement for Insurance Expense? For Shipping Supplies Expense? (Do not round intermediate calculations.)

     

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6.

value:
1.00 points

Required information

4.	What amount should be reported on the December 31, 2014, balance sheet for Prepaid Insurance? For Shipping Supplies? (Do not round intermediate calculations.)

     

Answer 1

1)

Date	Account title	Debit	credit
December 31,2014	Insurance expense	900
	Prepaid insurance		900
	[Being insurance expired for 3 months(1Oct -31Dec 2014] out of 24 months (2years) .Insurance expired :7200*3/24 =900]

2)Supplies used =Beginning Balance+Purchase-Ending balance

                  = 15500+61000-18000

                 = 58500

Date	Account title	Debit	credit
December 31,2014	Shipping supplies expense	58500
	Shipping supplies		58500

3)

Amount to be reported on Income statement:

	Expense amount
Insurance expense	900
Shipping supplies expense	58500

4)

Amount to be reported on Balance sheet:

	Amount
Prepaid Insurance	7200-900 expired= 6300
Shipping supplies	18000