E4-5 Recording Adjusting Entries and Reporting Balances in Financial StatementsLO4-1, LO4-2A+T Williamson Company is making adjusting entries for the year ended December 31 of the current year. In developing information for theadjusting entries, the accountant learned the following:1. A two-year insurance premium of $4,800 was paid on October 1 of the current year for coverage beginning on that date. The bookkeeperdebited the full amount to Prepaid Insurance on October 12 At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supportingdocumentsPage 208Shipping supplies on hand, January 1 of the current year$13,000Purchases of shipping supplies during the current year75,000Shipping supplies on hand, counted on December 31 of the current year20,000Required1. Using the process illustrated in the chapter, record the adjusting entry for insurance at December 31 of the current year2. Using the process illustrated in the chapter, record the adjusting entry for supplies at December 31 of the current year, assuming that theshipping supplies purchased during the current year were debited in full to the account Shipping Supplies3. What amount should be reported on the current year's income statement for Insurance Expense? For Shipping Supplies Expense?4. What amount should be reported on the current year's balance sheet for Prepaid Insurance? For Shipping Supplies?

Question
Asked Oct 23, 2019
E4-5 Recording Adjusting Entries and Reporting Balances in Financial Statements
LO4-1, LO4-2
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:
1. 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
2 At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supporting
documents
Page 208
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
Required
1. Using the process illustrated in the chapter, record the adjusting entry for insurance at December 31 of the current year
2. Using the process illustrated in the chapter, record the adjusting entry for supplies at December 31 of the current year, assuming that the
shipping supplies purchased during the current year were debited in full to the account Shipping Supplies
3. What amount should be reported on the current year's income statement for Insurance Expense? For Shipping Supplies Expense?
4. What amount should be reported on the current year's balance sheet for Prepaid Insurance? For Shipping Supplies?
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E4-5 Recording Adjusting Entries and Reporting Balances in Financial Statements LO4-1, LO4-2 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: 1. 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 2 At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supporting documents Page 208 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 Required 1. Using the process illustrated in the chapter, record the adjusting entry for insurance at December 31 of the current year 2. Using the process illustrated in the chapter, record the adjusting entry for supplies at December 31 of the current year, assuming that the shipping supplies purchased during the current year were debited in full to the account Shipping Supplies 3. What amount should be reported on the current year's income statement for Insurance Expense? For Shipping Supplies Expense? 4. What amount should be reported on the current year's balance sheet for Prepaid Insurance? For Shipping Supplies?

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Step 1

Hence, the adjusted amount of prepaid insurance is $600. Here, prepaid insurance expenses being an asset is credited. The reason being, $600 worth of prepaid insurance becomes due on December 31 and is not treated as an asset.

Date
31-Dec Insurance expenses
Particulars
Post ref.
Debit(S)
Credit(S)
$600
Prepaid insurance expenses
(To adjust prepaid insurance
being expired)
$600
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Date 31-Dec Insurance expenses Particulars Post ref. Debit(S) Credit(S) $600 Prepaid insurance expenses (To adjust prepaid insurance being expired) $600

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Step 2

Hence, the adjusted amount of unsold shipping supplies is $20,000.This entry is made to adjust the unsold amount worth $20,000 as the purchases were debited in full to the account shipping supplies. Therefore, trading account is credited to nullify the effect of purchase debited and transfer the amount to the new account namely closing stock for shipping supplies account.

                                                                                                                    

Particulars
31-Dec Closing stock for shipping supplies
Trading account
(Being adjustment made for the unsold
shipping supplies)
Post ref.
Debit(S)
Credit(S)
Date
$20,000
$20,000
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Particulars 31-Dec Closing stock for shipping supplies Trading account (Being adjustment made for the unsold shipping supplies) Post ref. Debit(S) Credit(S) Date $20,000 $20,000

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Step 3

Hence, insurance expenses is $600 which is shown on the debit side of the income statement for the current year is $600. Here, insurance expense for th...

Insurance expenses for the current year Total amount paid x
Months of curent year
Total number of months
3
= $4,800x
24
= $600
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Insurance expenses for the current year Total amount paid x Months of curent year Total number of months 3 = $4,800x 24 = $600

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