Question

Financial Analysis Using Adjusted Account Data

Selected T-account balances for Bloomfield Company are shown below as of January 31, which reflect its accounting adjustments. The firm uses a calendar-year accounting period, but prepares monthly accounting adjustments.
Supplies Jan. 31 Bal 2,700
Supplies Expense Jan. 31 Bal. 2,880
Prepaid Insurance Jan. 31 Bal. 1,722
Insurance Expense Jan. 31 Bal. 246
Wages Payable 2,100 Jan. 31 Bal.
Wages Expense Jan. 31 Bal. 9,600
Truck Jan. 31 Bal 21,456
Accumulated Depreciation
- Truck 5,960 Jan. 31 Bal.
a. If the amount in supplies expense represents the January 31 adjustment for the supplies used in January, and $1,860 worth of supplies were purchased during January, what was the January 1 beginning balance of supplies?
b. The amount in the insurance expense account represents the adjustment made at January 31 for January insurance expense. If the original insurance premium was for one year, what was the amount of the premium, and on what date did the insurance policy start?
c. If we assume that no beginning balance existed in either in either wage payable or wage expense on January 1, how much cash was paid as wages during January?

Answer 1

a. $3,720

b.$ 2,952

1st September

c. $7,500

Step-by-step explanation:

a. Calculation to determine what was the January 1 beginning balance of supplies

Using this formula

Supplies beginning balance = Supplies Jan 31 balance + Supplies used (expense) – Supplies purchased

Let plug in the formula

Supplies beginning balance= $ 2700 + $ 2880 - $ 1860

Supplies beginning balance= $ 3,720

Therefore the January 1 beginning balance of supplies is $3,720

b. Calculation to determine what was the amount of the premium, and on what date did the insurance policy start

PREMIUM AMOUNT

Amount of the premium = $ 246 x 12 months / 1 months

Amount of the premium= $ 2,952

DATE did the insurance policy start

First step is to calculate the No. of unexpired insurance month

No. of unexpired insurance month = $ 1722 / $ 246

No. of unexpired insurance month= 7 months.

Now let determine the date

Expired month = 12 months – 7 months

Expired month = 5 months

Therefore The policy will begin on 1ST SEPTEMBER of the previous year

(Sept, Oct, Nov, Dec and Jan = 5 months]

Therefore the amount of the premium is $2,952 and the date the insurance policy start is 1st September

c. Calculation to determine how much cash was paid as wages during January

Using this formula

Cash paid for Wages = Wages expense - Wages payable

Let plug in the formula

Cash paid for Wages=$ 9600-$ 2100

Cash paid for Wages= $ 7,500

Therefore cash was paid as wages during January is $7,500