Aubrae Company is making adjusting entries for the year ended December 31, 2014

| September 5, 2016

Question
Aubrae Company is making adjusting entries for the year ended December 31, 2014. In developing information for the adjusting entries, the accountant learned the following:

a.

A two-year insurance premium of $5,520 was paid on October 1, 2014, for coverage beginning on that date.

b.

At December 31, 2014, the following data relating to Shipping Supplies were obtained from the records and supporting documents.

Shipping supplies on hand, January 1, 2014

$

13,500

Purchases of shipping supplies during 2014

69,500

Shipping supplies on hand, counted on December 31, 2014

15,500

Required:

1.

Record the adjusting entry for insurance at December 31, 2014, assuming that the premium was paid on October 1, 2014, and the bookkeeper debited the full amount to Prepaid Insurance.

2.

Record the adjusting entry for supplies at December 31, 2014, assuming that the purchases of shipping supplies were debited in full to Shipping Supplies.

4.

What amount should be reported on the December 31, 2014, balance sheet for Prepaid Insurance? For Shipping Supplies?

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