Question

In: Accounting

The prepaid insurance account had a balance of $7,000 at the beginning of the year

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


Solutions

Expert Solution

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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)

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