Hi all, i was wondering if someones could help me with the following two questions:
1.
on 21 September 2011, the business paid $3300 (including $300 GST) to renew the annual insurance policy due to expire on 30 September 2011 (chq. 538). The payment was correctly recorded in the Prepaid insurance account. On June 30 2012, before any adjusting entries, the balance of the Prepaid insurance was $3720. Prepare the necessary journal entries to record the balance day adjustment for the year ending 30 June 2012 - the answers have debited insurance expense by
$2970, and credited the profit/loss summary
- i understand the credit and debits, just not how they got to that figure
2.
Discuss how using the FIFO method of stock recoring will impactGross Profit suring a period when cost prices of stock are falling i got the first part of the answer right, but the next part confused me. They said:
- if a set $ amount or fixed % is added to cost price, then as cost price falls, selling price will also fall. This means the margins will remain unchanged and the $ figure of gross profit per unit will fall
- if the business maintains a set selling price regardless of cost price then as cost falls the margin on sales will increase, leading to higher gross profit
so if someone could explain that, that would be really helpfull haha
sorry for all the questions :/