s CugiNg nal Balance of Salami Inc as of December 31 201 DES

s CugiNg nal Balance of Salami, Inc. as of December 31, 201 DESCRIPTION CAREFULLY and record the transaction for its ending impact for 2 NO QUESTIONS WILL BE ANSWERED. PRINT CLEARLY and USE COMPLETE appears below: READ EACH Account Titles. Account Cash Accounts Receivable Allowance for Doubtful Accounts Prepaid Rent Prepaid Insurance 496,000 499 525,000 150 875 215,0 Furniture and Fixtures on Accounts Payable Wages Payable 85 5000 80,000 1,200 Stock Retained Earnings 595,000 Revenue Cost of Goods Sold Rent Expense Expense Utility Expense Bad Insurance Expense Dividends Totals Debt Expense 1) Purchase of inventory for resale was $5,000,000. All purchases were made on account. 2) Payments for inventory purchased on account were $5,210,000. 3) Sales of merchandise totaled $11,200,000. Of this amount, 20% of the sales were made on account; the remaining sales were paid in cash. 4) The cost of the merchandise sold during the year was $4,000,000. 5) Collections on Accounts Receivable during the year were $2,380,000. 6) Cash payments to employees during the year, totaled $1,215,000. This was both towards unpaid salaries at the beginning of the year and for salaries earned during 2012 7) Paid $100,000 cash for utilities during the year 8) During the year $56,000 of customer accounts were wirtten off as uncollectible. Name ble at year-end should be $75,000. 9) Accrued wages paya 0) On October 1, 2011, $600,000 was paid for a 24-month operating lease for the building. The lease will be expensed evenly over the lease period. 11) On June 1, 2011, a check for $360,000 was Issued for a one-year insurance policy to be expensed over the next 12 months. On June 1, 2012 a check for $480,000 was issued for a one-year cy. The insurance will be expensed evenly over the next 12 months. The payment for insurance poli the policy purchased lin 2012 has not been recorded. deareciation. The life of the furniture and fixtures is 10 years and the company estimates a residual value of $5,000. se for the year on the furniture and fixtures is calculated using straight line 12) Depreciation expen 13) The company has determined that the allowance for doubtful accounts 14) Dividends were declared and paid in the amount of $4,000.000 during the year

Solution

As we are calculating insurance expensed for 2012.

So, On June 1, 2012 we purchased a insurance policy for one year. So, this insurance policy will give benefit from June 1, 2012 to May 31, 2013.

So, the insurance policy gave us 7 months (from June 1, 2012 to December 31, 2012) benefit in the year 2012.

Now we have to expense its cost for 7 months.

Cost of each month = 480,000 ÷ 12 = $40,000 per month

So, the insurance policy expensed for 2012 = 40,000 x 7 = $280,000