Question

Adjustment Process Alex Vera organized Succulent Express at the beginning of February 20Y4. During February, Succulent Express entered into the following transactions: a. Terry Mason invested $30,000 in Succulent Express in exchange for common stock. b. Paid $5,400 on February í for an insurance premium on a one-year policy. c. Purchased supplies on account, $1,800. d. Received fees of $57,000 during February. e. Paid expenses as follows: wages, $21,600; rent, $6,400; utilities, $2,800; and miscellaneous, $3,200. f. Paid dividends of $8,000. The transactions above have already been recorded in the integrated financial statement framework below. Record the adjusting entries at the end of February to record the insurance expense and supplies expense. There was $300 of supplies on hand as of February 28. Identify the adjusting entry for insurance as (al) and supplies as (a2). Use the integrated financial statement framework below. After each transaction, enter a balance for each item. If an amount box does not require an entry, leave it blank. Enter account decreases as negative amounts using the minus sign.

Answer 1

Answer 1. Integrated financial framework

	Balance sheet (Amount in $)
Particulars	Assets	=	Liabilities	+	Stockholders' Equity
	Cash	+	Supplies	+	Prepaid Insurance	=	Accounts Payable	+	Common Stock	+	Retained Earnings
a. Investment	30,000								30,000
b. Paid insurance	-5400				5,400
Balances	24,600				5,400				30,000
c. Purchased supplies			1800				1800
Balances	24,600		1,800		5,400		1800		30,000
d. Fees earned	57,000										57,000
Balances	81,600		1,800		5,400		1,800		30,000		57,000
e. Paid expenses	-34000										-34000
Balances	47,600		1,800		5,400		1,800		30,000		23,000
f. Paid dividends	-8,000										-8,000
Balances	39,600		1,800		5,400		1,800		30,000		15,000
a1. Insurance expense					-450						-450
Balances	39,600		1,800		4,950		1,800		30,000		14,550
a2. Supplies expense			-1500								-1500
Balances, February 28	39,600		300		4,950		1,800		30,000		13,050

Notes

1. Prepaid Insurance Exp.(Amount in $)

particulars	Amount	particulars	Amount
		Cash	5,400
Insurance Expense Account= 5400/12	450
Balance C/f	4,950
Total	5,400	Total	5,400

Journal entry

Account	Debit	Credit
Insurance Exp	450
Prepaid Insurance Exp.		450
(to Insurance exp Accrued and booked as expense )

2. Supplies (Amount in $)

particulars	Amount	particulars	Amount
Account Payable	1800	Supplies Expense	1500
		Balance C/f	300
Total	1800	Total	1800

Journal entry

Account	Debit	Credit
Supplies Exp	1500
Supplies A/c		450
(to Supplies used during the month recorded as expense)

Answer 2.Income Statement

Income Statement (Amount in $)
For the Month Ended February 28, 20Y4
d.Fees earned	57,000
e. Wages expense	-21,600
e.Rent expense	-6,400
e.Utilities expense	-2,800
e.Miscellaneous expense	-3,200
a1.Insurance expense	-450
a2. Supplies expense	-1500
Net income	21,050