Question

85/100 Total points anded Help Ex If the Common stock account had a $10,000 credit balance at the beginning of the period, and during the period, an additional $5,000 of common stock is issued, the balance in the common stock account listed on the trial balance will be equal to a debit balance of 55.000

Answer 1

1. Based on the information given in the question , for the common stock,

The common stocks are the shares issued to the shareholders denotes the number of share and par value amount issued. It is clearly speaking a part of liabilities side of the balance sheet as it denotes the money being taken from the investors which will be payable in some form at later date.

So common stocks have credit balance , additional issue will lead to further increase of common stock.

Here the opening common stock balance = $ 10000 credit balance and additional issue will increase the credit balance by $ 5000

Thus common stock balance to be listed at trail balance = $ 10,000 + 5000 = $ 15000 credit balance.

Thus the given option that debit balance of $ 5000 is incorrect.

2.

Adjusting entries are made at a period end may be months end or year end to book the expenses and incomes which are actually incurred or earned during that period and deferred the remaining.

A) Here the amount is already paid for 6 months and in December the 6 months have expired so all the expenses paid will be incurred during the current year..so the earlier prepaid entry made at the time of payment needs to be reversed by Debiting the actual insurance Expenses and crediting the prepaid.

Thus, Adjusting entry will be : Debit to Insurance Expenses and credit to prepaid expenses by $ 1200.

B). Here opening supplies balance = $ 5000 and purchase are 2000 so total dupples are $ 7000. But the actual closing supplies balance is only $ 800.

Thus the remaining supplies of $ 6200 have been consumed during the year, which needs to be reversed from the supplies by Debiting the supplies Expenses and crediting the supplies.

Thus Adjusting entry will be ; Debit to Supplies Expenses by $ 6200 and credit to supplies by $ 6200.

Feel free to comment doubts if any..