Question
In: Accounting
The Prepaid Insurance account has a normal balance of $5,625 at the beginning of the month....
The Prepaid Insurance account has a normal balance of $5,625 at the beginning of the month. The company used $1,470 of insurance coverage during the month. Which of the following statements is correct?
-
The company should credit Insurance Expense for $1,470 and debit Prepaid Insurance for $1,470.
-
Retained earnings will decrease and stockholders' equity will increase.
-
The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470.
-
Retained earnings and stockholders' equity will both increase.
Solutions
Expert Solution
Answer: The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470
Explanation:
Balance in Prepaid Insurance account represents the amount of insurance paid which is not yet incurred by the company at a particular date. The same will be recognised as expense only when it is incurred.
When a part of insurance coverage is used during a particular period, appropriate amount of expense has to be recognised by trasferring the the appropriate amount from prepaid insurance account to insurance expense account.
In the given situation, it is given that company used $1,470 of insurance coverage during the month
Therefore, out of the beginning balance of $5,625 of prepaid insurance, $1,470 should be transferred to insurance expense account. by debiting Insurance expense account and crediting Prepaid Insurance account.
The Journal entry to record the adjustment will be:
Insurance Expense 1,470
Prepaid Insurance 1,470
ekkarill92 answered 2 years agoRelated Solutions
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adjusting entry required under each of the following alternatives
for determining the amount of the adjustment:a. The amount of unexpired insurance applicable
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Classify each account and State the normal ending balance
• Prepaid Insurance
• Selling Expenses
• Sales Revenue
• Accounts Receivable
• Accounts Payable
• Retained Earnings
• Land
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• Building and Equipment
• Interest Payable
• Inventory
• Income Tax Payable
Income Tax Expense
Cash
Notes payable
Accumulated Depreciation
Common Stock
Administrative Expenses
Dividends
Cost of Goods Sold
Rent Revenue
Salaries Payable
Allowance for Doubtful Accounts
Additional Paid-in Capital
the prepaid balance in the prepaid insurance account represent the remaining balance of two year policy...
the prepaid balance in the prepaid insurance account
represent the remaining balance of two year policy purchased in
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trial balance unjusted 31 October 2011
prepaid insurance 9350
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furniture will be worthless
office furniture October 31 2011 unjusted trial balance
61440
what are the adjustments t for this two
transactions
The balance in the prepaid insurance account, before adjustment at the end of the year, is...
The balance in the
prepaid insurance account, before adjustment at the end of the
year, is $27,000. Journalize the adjusting entry required under
each of the following alternatives for determining the amount of
the adjustment:
a.
The amount of insurance expired during the year is $20,250.
* Insurance expense =
$20,250
* Prepaid Insurance =
?
b.
The amount of unexpired insurance applicable to future periods is
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* Insurance expense =
?
* Prepaid Insurance =
$20,250
The prepaid insurance account has an unadjusted balance of $46,000 at December 31, 2018, the end...
The prepaid insurance account has an unadjusted balance of
$46,000 at December 31,
2018, the end of Hanson Company's accounting year. Insurance
expense has a $2,000 balance
at the same point in time.
The following policies are in effect at December 31, 2018:
Policy Type Date Acquired Policy Term Total Premium
Paid When Acquired
Liability 1-31-17 2 years $48,000
Auto 6-30-18 2 years . $9,000
Business interruption . 8-1-18 1 year $840
1. Determine the adjusted balance in prepaid insurance...
The prepaid insurance account has an unadjusted balance of $46,000 at December 31, 2018, the end...
The prepaid insurance account has an unadjusted balance of
$46,000 at December 31,
2018, the end of Hanson Company's accounting year. Insurance
expense has a $12,000 balance
at the same point in time. The following policies are in effect
at December 31, 2018:
Policy Date Policy Total Premium
Type Acquired Term Paid when acquired
Liability 1-31-17 2 years $48,000
Auto 6-30-18 2 years 9,000
Business interruption 8-1-18 1 year 840
1. Determine the adjusted balance in prepaid insurance at
December...
The prepaid insurance account has an unadjusted balance of $46,000 at December 31, 2018, the end...
The prepaid insurance account has an unadjusted balance of
$46,000 at December 31, 2018, the end of Hanson Company's
accounting year. Insurance expense has an unadjusted $2,000 balance
at the same point in time. Some policies that were in effect have
expired. Some of those were renewed and some were not. The
following policies are in effect at December 31, 2018:
Policy
Date
Policy
Total Premium
Type
Acquired Term Paid
when acquired
Liability
1-31-17
2 years $48,000
Auto
6-30-18 ...
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recognized and $20,000 of insurance was prepaid at year-end. What
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changed to 20% in the current year?
20,000
16,000
4,000
8,000
12,000
prepaid insurance account has a balance of 9350 remaining in October 31 2011 of two year...
prepaid insurance account has a balance of 9350
remaining in October 31 2011 of two year policy purchased in April
2010
the calculation was like that
9350 /17 550
prepaid insurance for year
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way
Which of the following is the proper adjusting entry, based on a prepaid insurance account balance...
Which of the following is the proper adjusting entry, based on a
prepaid insurance account balance before adjustment of $17,192 and
unexpired insurance of $2,150, for the fiscal year ending on April
30?
a.debit Insurance Expense, $17,192; credit Prepaid Insurance,
$17,192
b.debit Insurance Expense, $15,042; credit Prepaid Insurance,
$15,042
c.debit Insurance Expense, $2,150; credit Prepaid Insurance,
$2,150
d.debit Prepaid Insurance, $15,042; credit Insurance Expense,
$15,042
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