Question

Issued 150,000 shares of common stock in exchange for $750,000 cash. Purchased office equipment at a cost of $121,250. $48,500 was paid in cash and a note payable was signed for the balance owed. Purchased inventory on account at a cost of $300,000. The company uses the perpetual inventory system. Credit sales for the month totaled $510,000. The cost of the goods sold was $255,000. Paid $7,000 in rent on the store building for the month of June. Paid $3,600 to an insurance company for fire and liability insurance for a one-year period beginning June 1, 2021. Paid $216,750 on account for the merchandise purchased in 3. Collected $102,000 from customers on account. Paid shareholders a cash dividend of $7,500. Recorded depreciation expense of $2,425 for the month on the office equipment. Recorded the amount of prepaid insurance that expired for the month.

Answer 1

Answer:

1. Recorded depreciation expense:

Debit Depreciation expense $2,425

Credit Accumulated depreciation account $2,425

2. Recorded the amount of prepaid insurance that expired for the month

Debit Insurance Expense $300

Credits Prepaid Insurance $300

Explanation:

1. Recorded depreciation expense:

Debit Depreciation expense $2,425

Credit Accumulated depreciation account $2,425

2. Recorded the amount of prepaid insurance that expired for the month

The company paid $3,600 to an insurance company for fire and liability insurance for a one-year period, beginning June 1, 2021.

Insurance Expense for a month (at the end of Jun, 2021) = $3,600/12 = $300

The entry to record the amount of prepaid insurance that expired for the month:

Debit Insurance Expense $300

Credits Prepaid Insurance $300