High Class Painting purchased a 1-year insurance policy on 1 March 2020. The entire premium of...

High Class Painting purchased a 1-year insurance policy on 1 March 2020. The entire premium of $9000 was recorded by debiting Prepaid Insurance. Ignore GST.

Required
(a) Give the adjusting entry at 30 June for the financial year ending 30 June 2020.

(b) What amount should be reported in the 30 June 2020 Statement of Financial Position for Prepaid Insurance? What type of account should this be? Show calculations.

(c) If no adjusting entry was made on 30 June, by how much would profit be overstated or understated? Would assets be overstated or understated? Explain.

(d) What would your adjusting entry in requirement A be if the premium of $9000 was recorded by debiting Insurance Expense?

Expert Solution

ekkarill92 answered 2 years ago

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