Thursday, 7 May 2015

The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2013, trial balances contained the following account information:

The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2013, trial balances contained the following account information:
  
  Nov. 30 Dec. 31
  Dr. Cr. Dr. Cr.
  Supplies 1,500      3,000     
  Prepaid insurance 6,000      4,500     
  Wages payable   10,000     15,000  
  Unearned rent revenue   2,000     1,000  

  
   The following information also is known:
a. The December income statement reported $2,000 in supplies expense.
b. No insurance payments were made in December.
c. $10,000 was paid to employees during December for wages.
d.
On November 1, 2013, a tenant paid Righter $3,000 in advance rent for the period November through January. Unearned rent revenue was credited.

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Explanation:
1.
Cost of supplies purchased = $3,000 + 2,000 – 1,500 = $3,500
 
2.
Insurance expense for December = $6,000 – 4,500 = $1,500
 
4.
Rent revenue recognized each month = $3,000 × 1/3 = $1,000