In: Accounting
Adjusting Entries for Prepaid Insurance
The prepaid insurance account had a balance of $7,000 at the beginning of the year. The account was debited for $24,000 for premiums on policies purchased during the year. Journalize the adjusting entry required under each of the following alternatives for determining the amount of the adjustment:
a. The amount of unexpired insurance applicable to future periods is $8,500.
Insurance Expense | |||
Prepaid Insurance |
b. The amount of insurance expired during the year is $22,500.
Insurance Expense | |||
Prepaid Insurance |
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Please find below the answer | ||
Statementshowing Computations | ||
Paticulars | Amount | |
Beginning balance in prepaid insurance | 7,000.00 | |
Addition during the year | 24,000.00 | |
Ending balance in prepaid insurance before adj | 31,000.00 | |
Dr Amt | Cr Amt | |
a) | ||
Insurance expense DR | 22,500.00 | |
To prepaid insurance | 22,500.00 | |
(Being insurance expired = 31000 - 8500) | ||
b) | ||
Insurance expense DR | 22,500.00 | |
To prepaid insurance | 22,500.00 | |
(Being insurance expired) |