9 QS 3-6 Prepaid (deferred) expenses adjustments LO P1 For each separate case be

Question

9 QS 3-6 Prepaid (deferred) expenses adjustments LO P1 For each separate case below, follow the three-step process for adjusting the supplies asset account at December 31 4 37 points Step 1: Determine what the current account balance equals Step 2: Determine what the current account balance should equal. Step 3 Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year eBook a. The Supplies account has a $300 debit balance to start the year. No supplies were purchased during the current year. A mber 31 physical count shows $110 of supplies remaining. Hint Supplies Step 1: Determine what the current account balance equals. Print Step 2: Determine what the current account balance should equal Step 3: Record the December 31, adjusting entry to get from step 1 to step 2 b. The Supplies account has an $800 debit balance to start the year. Supplies of S2.100 were purchased during the current year and debited to the Supplies account. A December 31 physical count shows $650 of supplies remaining. Supplies Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Type here to search

Explanation / Answer

a ) Step 1 : Current account balance equals $300, which is the balance as at the start of the current year, because there is no further adjusting entry is made, so the starting balance in the year is the balance now.

Step 2: Current account balance should equal $110. $110 amount of supplies is what we have in hand currently as stock, at the end of year.

Step 3 : Suppplies of the amount of $190 ($300 - $110) have been issued to production or transferred to overhead.We have to make the adjusting entry on 31 December for issuing the supples to overhead.Supplies of the amount of $190 are issued to production or overhead. Adjusting entry will be:

Debit : Overhead -Control $190

Credit : Raw material supplies $190

a ) Step 1 : Current account balance equals $800, which is the balance as at the start of the current year, because there is no further adjusting entry is made,so the starting balance in the year is the balance now.

Step 2: Current account balance should equal $650. $650 amount of supplies is what we have in hand currently,as stock, at the end of year.

Step 3 : Suppplies of the amount of $2250 ($800 + $2100 - $650) have been issued to production or transferred to overhead. We have to make the adjusting entry on 31 December for issuing the supples to overhead.Before this adjusting entry, we should also make an entry for purchases of supplies of $2100. Entry for purchases of $2100 supplies is:

Debit: Raw material supplies $2100

Credit: Cash $2100

Now, Adjusting entry on December 31 will be:

Debit : Overhead -Control $2250

Credit : Raw material supplies $2250

c) Step 1 : Current account balance equals $4000, which is the balance as at the start of the current year, because there is no further adjusting entry is made,so the starting balance in the year is the balance now.

Step 2: Current account balance should equal $2660. $2660 amount of supplies is what we have in hand currently,as stock, at the end of year.

Step 3 : Suppplies of the amount of $10740 ($4000 + $9400 - $2660) have been issued to production or transferred to overhead. We have to make the adjusting entry on 31 December for issuing the supples to overhead.Before this adjusting entry, we should also make an entry for purchases of supplies of $9400. Entry for purchases of $9400 supplies is:

Debit: Raw material supplies $9400

Credit: Cash $9400

Now, Adjusting entry on December 31 will be:

Debit : Overhead -Control $10740

Credit : Raw material supplies $10740

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