here are a series of questions and my answers are down below, please help me if I am wrong
1. Sain Advertising Ltd.’s opening trial balance on January 1 shows Supplies $1,600. On January 11, the company purchased additional supplies for $2,510 on account. On January 31, there are $1,640 of supplies on hand.
Prepare the adjusting entry required at January 31, assuming adjusting entries are prepared monthly.
2. On January 2, 2018, Claymore Corporation purchased a vehicle for $60,000 cash. The company uses straight-line depreciation and estimates that the vehicle will have a five-year useful life. The company has a December 31 year end and adjusts its accounts annually.
Prepare the adjusting entries required on December 31, 2018, and 2019.
3. On June 1, 2018, Bere Ltd. pays $9,240 to Safety Insurance Corp. for a one-year insurance policy. Both companies have fiscal years ending December 31 and adjust their accounts annually, Calculate the amount of insurance that expired during 2018 and the unexpired cost at December 31.
my answers:
1. supplies 2470
accounts payable 2470
2.
not sure about this one?
3. 6*770 =4620 - expired
unexpired: 4620
Let's go through each question one by one and check your answers:
1. For the first question, we need to prepare the adjusting entry for supplies at January 31. The opening trial balance on January 1 shows Supplies $1,600, and additional supplies were purchased for $2,510 on January 11. On January 31, there are $1,640 of supplies on hand.
To calculate the supplies used during January, you need to subtract the supplies on hand at January 31 from the sum of the opening balance and purchases during January.
Supplies used during January = Opening Supplies + Purchases during January - Supplies on hand at January 31
Supplies used during January = $1,600 + $2,510 - $1,640
Supplies used during January = $3,110 - $1,640
Supplies used during January = $1,470
The adjusting entry would be to debit the Supplies Expense account (or a similar expense account) for $1,470 and credit the Supplies account for $1,470. So, your answer for the adjusting entry is incorrect.
The correct answer for the adjusting entry would be:
Supplies Expense $1,470
Supplies $1,470
2. For the second question, we need to prepare the adjusting entries on December 31, 2018, and 2019, for the vehicle purchased on January 2, 2018.
Since the company uses straight-line depreciation and estimates a five-year useful life for the vehicle, we need to calculate the annual depreciation expense for the vehicle.
Annual depreciation expense = Vehicle cost / Useful life
Annual depreciation expense = $60,000 / 5 years
Annual depreciation expense = $12,000
For the adjusting entry on December 31, 2018, we need to debit Depreciation Expense (or a similar expense account) for $12,000 and credit Accumulated Depreciation for $12,000. This entry recognizes the depreciation expense for one year.
For the adjusting entry on December 31, 2019, we need to repeat the same adjusting entry as the previous year since the vehicle still has a remaining useful life of four years. Therefore, the entries for both years would be the same.
So, your answer for the adjusting entries is incorrect.
The correct answer for the adjusting entry on December 31, 2018, and 2019, is:
Depreciation Expense $12,000
Accumulated Depreciation $12,000
3. For the third question, we need to calculate the amount of insurance that expired during 2018 and the unexpired cost at December 31. The company paid $9,240 for a one-year insurance policy starting on June 1, 2018.
To calculate the amount of insurance expired during 2018, you need to determine the number of months between June 1 and December 31, and multiply that by the monthly cost of insurance.
Months expired in 2018 = 12 months - 6 months (June 1 to December 31)
Months expired in 2018 = 6 months
Monthly insurance cost = Insurance cost / Number of months
Monthly insurance cost = $9,240 / 12 months
Monthly insurance cost = $770
Insurance expired during 2018 = Months expired in 2018 * Monthly insurance cost
Insurance expired during 2018 = 6 months * $770
Insurance expired during 2018 = $4,620
To calculate the unexpired cost at December 31, 2018, you need to determine the number of months between January 1 and December 31, and multiply that by the monthly cost of insurance.
Months unexpired at December 31, 2018 = 12 months - 6 months (already expired)
Months unexpired at December 31, 2018 = 6 months
Unexpired cost at December 31, 2018 = Months unexpired at December 31, 2018 * Monthly insurance cost
Unexpired cost at December 31, 2018 = 6 months * $770
Unexpired cost at December 31, 2018 = $4,620
So, your answer for the amount of insurance expired is correct, but your answer for the unexpired cost at December 31 is incorrect.
The correct answer for the unexpired cost at December 31, 2018, is $4,620.
I hope this clarification helps!