Question

Required information [The following information applies to the questions displayed below.) 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 $4,080 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 Purchases of shipping supplies during the current year Shipping supplies on hand, counted on December 31 of the current year Lies during the querent reathe current year $ 18,000 62,500 16,500 92,500 4. What amount should be reported on the current year's balance sheet for Prepaid Insurance? For Shipping Supplies? (Do not round intermediate calculations.) Prepaid insurance Shipping supplies

Answer 1

Answer

• Requirement 4

>Prepaid Insurance shall include the unexpired portion of 21 month Insurance = $ 4080 x 21/24 = $ 3570
This is because on 1 Oct, insurance was prepaid for 24 months (2 years).
Till 31 Dec of current year, 3 months insurance was expired (oct, Nov, Dec) and hence 24 – 3 = 21 months unexpired insurance was left prepaid.

>Shipping Supplies = $ 16,500 (the amount counted as physcially available on hand)