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

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)

ekkarill92 answered 1 year ago

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