Question

please write how you get numbers

1 Fes Company is making adjusting journal entries for the year ended December 31, 2018 in developing information for the adjusting Journal entries, you learned the following: a A two-year insurance premium of $7,400 was hald on January 1, 2018, for coverage beginning on that date. As of December 31, 2018. the unadjusted balances were $7.400 for Prepaid Insurance and so for Insurance Expense b. At December 31, 2018. you obtained the following data relating to supplies 11 DO swooed Unadjusted balance in Supplies on December 31, 2018 Unadjusted balance in Supplies Expense on December 31, 2018 Supplies on and, counted on December 31, 2018 $16,000 74.000 10,800 Required: 1. Of the 57.400 paid for insurance, what amount should be reported on the 2018 income statement as Insurance Expense? What amount shodio be reported on the December 31, 2018. balance sheet as Prepaid Insurance? 2. What amount should be reported on the 2018 income statement as Supplies Expense? What amount should be reported on the December 31, 2018, balance sheet as Supplies? 3. Indicate the accounting equation effects of the adjustment required for insurance and supplies

Answer 1

1) Given , On Jan 1 2018 Insurance premium of $7,400 was paid.

So at the end of the year, The insurance expense is $7,400 * (1/2) = $3,700

Prepaid Insurance = $7,400 - $3.700 = $3.700

Hence, in Income statement the insurance expense is reported as $3,700 and on Balance sheet Prepaid insurance is reported as $3,700

2) Supplies Expense = Balance of Supplies expense till now + Unadjusted Supplies Balance - Supplies on hand at year end

= $16,000 + $74,000 -$10,000

Supplies Expense =. $80,000

Supplies in hand = $10,000

Hence, in Income statement the Supplies expense is reported as $80,000and on Balance sheet Supplies is reported as $10,000.

3) The Accounting Equations for the adjustments of insurance and supplies is as follows.

Transactions	Assets	Amount	=	Liabilities	Amount	+	Stockholders equity	Amount
a	Prepaid Insurance	($3,700)					Insurance Expense	($3,700)
b	Supplies	($80,000)					Supplies Expense	($80,000)