On March 1, 2009, the premium on a two-year insurance policy on equipment was paid amounting...

On March 1, 2009, the premium on a two-year insurance policy on equipment was paid amounting to $1,800. How would the financial position as of December 31, 2009 (the end of the accounting period) be affected if the accountant did not record the adjusting entry?

Select one:

a. No accounts will be affected.

b. Assets overstated by $750; Liabilities unaffected; Owners' equity overstated by $750.

c. Assets understated by $750; Liabilities unaffected; Owners' equity understated by $750.

d. Assets understated by $1,500; Liabilities unaffected; Owners' equity understated by $750.

Expert Solution



	Adjusting entry required
	1800/24*10
	750

	adjusting entry required
	insurance expense	DR	750	so income overstated
	prepaid insurance	CR	750	assets overstated

answer)	option B
	Assets overstated by $750;Liabilities unaffected ;Owner's equity
	overstated by $750

ekkarill92 answered 3 years ago

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