Fes Company is making adjusting journal entries for the year ended December 31, 2015. In developing information for the adjusting journal entries, you learned the following:
a. A two-year insurance premium of $7,700 was paid on January 1, 2015, for coverage beginning on that date. As of December 31, 2015, the unadjusted balances were $7,700 for Prepaid Insurance and $0 for Insurance Expense.
b. At December 31, 2015, you obtained the following data relating to supplies.
Unadjusted balance in Supplies on December 31, 2015 $ 17,500
Unadjusted balance in Supplies Expense on December 31, 2015 77,000
Supplies on hand, counted on December 31, 2015 12,000
Required:
1. Of the $7,700 paid for insurance, what amount should be reported on the 2015 income statement as Insurance Expense? What amount should be reported on the December 31, 2015, balance sheet as Prepaid Insurance?