Thapa Company is making adjusting entries for the year ended December 31. 2004. In developing information for the adjusting entries, the accountant learned the following:

a. A two-year insurance premium of $7,200 was paid on September 1. 2004. for coverage beginning on that date.

b. At December 31. 2004, the following data relating to shipping supplies was obtained from the records and supporting documents.

Required: 1. What amount should be reported on the 2004 income statement for Insurance Expense For Shipping Supplies Expense? 2. What amount should be reported on the December 3 1 . 2004. balance sheet for Prepaid Insurance?

For Shipping Supplies? 3. Using the process illustrated in the chapter, record the adjusting entry for insurance at December 31. 2004, assuming that the premium was paid on September 1, 2004. and the bookkeeper debited the full amount to Prepaid Insurance. 4. Using the process illustrated in the chapter, record the adjusting entry for supplies at December 31.

2004. assuming that the purchases of shipping supplies were debited in full to Shipping Supplies.

Transcribed Image Text:

Shipping supplies on hand, January 1. 2004 Purchases of shipping supplies during 2004 Shipping supplies on hand, counted on December 31, 2004 $15,000 72,000 11,000