Homework Answers
| Insurance expense is to be recognized for 10 months March 2013- December 2013 |
| Insurance expense to be recognized = 82500*10/12= $68,750 |
| If insurance adjustment is not recorded, net income and assets will be overstated. |
| Net income and assets will be overstated by $68,750 |
| Option B is correct |
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repaid Insurance—Annual Adjustments
On April 1, 2017, Stratton, Inc., purchases a 24-month property
insurance policy for $79,200. The policy is effective immediately.
Assume that Stratton prepares adjustments only once a year, on
December 31.
Required:
1. Compute the monthly cost of the insurance
policy.
$per month
2. Identify and analyze the transaction to
record the purchase of the policy on April 1, 2017.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?
If a financial statement item is...
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repaid Insurance—Annual Adjustments
On April 1, 2017, Stratton, Inc., purchases a 24-month property
insurance policy for $79,200. The policy is effective immediately.
Assume that Stratton prepares adjustments only once a year, on
December 31.
Required:
1. Compute the monthly cost of the insurance
policy.
$per month
2. Identify and analyze the transaction to
record the purchase of the policy on April 1, 2017.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?
If a financial statement item is...
a. An insurance policy covering three years was purchased on January 1, 2021, for $3,600. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item. b. During 2021, the company received a $625 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The $625 was credited to sales revenue. No entry was recorded for the cost of merchandise. c. There were no supplies listed in the balance sheet...
During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2021. you discover the following: a. An insurance policy covering three years was purchased on January 1, 2021, for $6,000. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item. b. During 2021, the company received a $1.000 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The...
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