Question

The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2016, trial balances contained the following account information:
Nov. 30 Dec. 31
Dr. Cr. Dr. Cr.
Supplies 3,100 4,600
Prepaid insurance 7,600 5,300
Salaries and wages payable 18,000 16,600
Deferred rent revenue 5,200 2,600
The following information also is known:

(a) The December income statement reported $3,600 in supplies expense.
(b) No insurance payments were recorded in December.
(c) $18,000 was paid to employees during December for salaries and wages.
(d) On November 1, 2016, a tenant paid Righter $7,800 in advance rent for the period November through January. Deferred rent revenue was credited.

Required:

(1) What was the cost of supplies purchased during December?
(2) What was the adjusting entry recorded at the end of December for prepaid insurance?

Answer 1

Answer:

purchase of supplies 5,600

insurance expense      2,300 debit

           prepaid insurance            2,300 credit

Explanation:

(1) What was the cost of supplies purchased during December?

invneotry identity:

beginning supplies + purchase = ending supplies + expense

the left side are the input. The supplies could come from previous prior or be pruchase.

The right side the outputit could be consumer or kept at stock

3,100 + p = 4,600 + 3,600

purchase = 4,600 + 3,600 - 3,100 = 5,100

(2) What was the adjusting entry recorded at the end of December for prepaid insurance?

beginning insurance 7,600

ending insurance     (5,300)

adjustment:                2,300

there was insurance expired for the value of 2,300