Question

In: Accounting

Adjusting entry the prepaid insurance account is reported at $800 on the December 31, 2019, unadjusted...

Adjusting entry

the prepaid insurance account is reported at $800 on the December 31, 2019, unadjusted trial balance. Analysis of the insurance coverage reveals that the company has two policies that were acquired at the same premium :

A- policy A for 3 years was acquired on January 1, 2017.

b- policy B for 2 years was acquired on January 1, 2019.

Solutions

Expert Solution

A. Since policy was purchased on Jan 1, 2017 i.e. 2017, 2018 and 2019, therefore balance for that is balance only for 2019 is left which is 1/3rd of original value. Policy B is for 2 years out of which 2 years are remaining.

So -1/3x + x = $800, x = 600

Policy one expired = 600/3 = 200

Policy b expired = 600/2 = 300

Adjusting entry
Account Titles Debit Credit
Insurance Expense $500
Prepaid Insurance $500
(Insurance expired during the period)

ekkarill92 answered 1 year ago
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