Question

Required information (The following information applies to the questions displayed below.) 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 $4,080 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 Purchases of shipping supplies during the current year Shipping supplies on hand, counted on December 31 of the current year $ 18,000 62,500 16,500 3. What amount should be reported on the current year's income statement for Insurance Expense?

Answer 1

Answer:

The insurance expense for the period is $ 510

Explanation:

The insurance premium paid in advance for 2 years period is $ 4,080 and debited to prepaid insurance

The monthly insurance expense for insurance would be $ 4,080/ 24 months

$ 4,080 / 24 = $ 170 per month

The period of benefit for the insurance is from October to December so it is 3 months.

the insurance expense for the period is $ 170 per month * 3 months = $ 510