Question

Financial Analysis Using Adjusted Account Data Selected T-account balances for Bloomfield Company are shown below as of January 31, which reflect its accounting adjustments. The firm uses a calendar-year accounting period, but prepares monthly accounting adjustments, Supplies Jan. 31 Bal. 2,700 Supplies Expense Jan. 31 Bal 2,880 Prepaid Insurance Jan. 31 Bal. 1.722 Insurance Expense Jan. 31 Bal. 245 Truck Wages Payable 2,100 Jan. 31 Bal. Wages Expense Jan. 31 Bal. 9,600 Jan. 31 Bal. 26,100 Accumulated Depreciation - Truck 5,655 Jan. 31 Bal. a. If the amount in supplies expense represents the January 31 adjustment for the supplies used in January, and 51,860 worth of supplies were purchased during January, what was the January 1 beginning balance of supplies? b. The amount in the insurance expense account represents the adjustment made at January 31 for January insurance expense. If the original insurance premium was for one year, what was the amount of the premium, and on what date did the insurance policy start? Amount of the premium $ The policy began on of the previous year. c. If we assume that no beginning balance existed in either in either wage payable or wage expense on January 1, how much cash was paid as wages during January? d. If the truck has a useful life of five years (or 60 months), what is the monthly amount of depreciation expense, and how many months has Bloomfield owned the truck? months

Answer 1

Answers

• Requirement [a]
  Supplies beginning balance = Supplies Jan 31 balance + Supplies used (expense) – Supplies purchased
  = $ 2700 + $ 2880 - $ 1860
  = $ 3,720
• Requirement [b]
  Amount of the premium = $ 246 one month insurance x 12 months / 1 months = $ 2,952
  >Adjusted balance of Prepaid Insurance on 31 Jan = $ 1722
  >No. of unexpired insurance month = $ 1722 / $ 246 = 7 months.
  >Expired month = 12 – 7 = 5 months

The policy began on 1^st September of the previous year.[Sept, Oct, Nov, Dec and Jan = 5 months]

• Requirement [c]
  Cash paid for Wages = $ 9600 wages expense - $ 2100 wages payable
  = $ 7,500
• Requirement [d]
  >Monthly depreciation = ($26100 / 60 months) = $ 435

>Bloomfield has owned the truck for 13 months .[Accumulated Depreciation $ 5655 / $ 435 per month = 13 months]