Question

E4-5 (Static) Recording Adjusting Entries and Reporting Balances in Financial Statements LO4-1, 4-2

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 $4,800 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$13,000 

Purchases of shipping supplies during the current year 75,000 

Shipping supplies on hand, counted on December 31 of the current year 20,000 

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

4. What amount should be reported on the current year's balance sheet for Prepaid Insurance? For Shipping Supplies? 

Answer 1

3

Prepaid Insurance is for 24 months and 3 months of coverage expired during year

Insurance expense	600	=4800*3/24
Shipping supplies, January 1	13000
Add: Purchase of Supplies	75000
Less: Shipping supplies, December 31	-20000
Shipping supplies expense	68000
4
Prepaid Insurance	4200	=4800-600
Shipping supplies	20000