On July 1 of the current year, Uber paid a premium in advance on a one-year...

On July 1 of the current year, Uber paid a premium in advance on a one-year insurance policy on equipment in the amount of $72,000. At the time, the full amount was recorded as prepaid insurance. On December 31, Uber would be required to record an adjusting entry that would include which of the following:

A. $6,000 Increase to insurance expense

B . $6,000 decrease to prepaid insurance

C. $12,000 increase to insurance expense

D. $12,000 decrease to prepaid insurance

Solutions

Expert Solution

Insurance amount paid = $ 72000 for 12 months on Jul 1
No of months for which insurance expired till 31 Dec
= From 1 Jul to 31 Dec
= 6 months
Insurance expired = $ 72000 x 6 months / 12 months
= $ 36,000
Hence,
Insurance expense will INCREASE by $ 36,000, and
Prepaid Insurance will DECREASE by $ 36,000
Note: None of the options matches with the above correct answer.

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

On July 1, a company paid the $1,200 premium on a one-year insurance policy with benefits...

On July 1, a company paid the $1,200 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the first year ended December 31? Multiple Choice $500. $600. $300. $1,200. $900.

1. On June 1, King Company paid $7,200 for one year of advertising, in advance. King...

1. On June 1, King Company paid $7,200 for one year of advertising, in advance. King Company recorded the transaction by debiting Prepaid Advertising and crediting Cash. Required: Journalize the adjusting entry on December 31. Note: Assume that the advertising is used evenly throughout the year 2. By the end of December, Brown Company has completed work, earning $2,500. Brown company has neither billed the clients nor recorded any of the revenue. Required: Journalize the adjusting entry on December 31....

On April 1, Year8, the premium on a one-year insurance policy on equipment was paid. The...

On April 1, Year8, the premium on a one-year insurance policy on equipment was paid. The premium was $3,000. The company does not have any other insurance policies. The financial statements as of 12/31/Year8 would report: a. Insurance expense $750; Prepaid insurance $2,250. b. Insurance expense $0; Prepaid insurance $3,000. c. Insurance expense $2,250; Prepaid insurance $750. d. Insurance expense $2,000; Prepaid insurance $1000. e. Insurance expense $3,000; Prepaid insurance $0.

Harrod Company paid $4,800 for a 4-month insurance premium in advance on November 1, with coverage...

Harrod Company paid $4,800 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is $4,800 and no adjustments had been made previously. The adjusting entry required on December 31 is: Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400. Debit Cash, $4,800; Credit Prepaid Insurance, $4,800. Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200. Debit Prepaid Insurance, $1,200; credit...

On September 1, 2009, Olpe Corporation paid $2,400 in advance for a one year insurance policy...

On September 1, 2009, Olpe Corporation paid $2,400 in advance for a one year insurance policy that covers the period September 1, 2009 through August 31, 2010. What amount of insurance expense should Olpe report for the year endedDecember 31, 2009? A)$800 B)$1,200 C)$2,400 D)$0

A. Paid $6,400 cash in advance on October 1 for a one-year insurance policy. B. Received...

A. Paid $6,400 cash in advance on October 1 for a one-year insurance policy. B. Received an $5,200 cash advance for a contract to provide services in the future. The contract required a one-year commitment, starting April 1. C. Purchased $2,000 of supplies on account. At year’s end, $255 of supplies remained on hand. D. Paid $11,520 cash in advance on August 1 for a one-year lease on office space. The Accounting Equation Event/ Adjustment Total Assets = Liabilities +...

On July 1 of the current calendar year, Plum Co. paid $9,500cash for management services...

On July 1 of the current calendar year, Plum Co. paid $9,500 cash for management services to be performed over a two-year period beginning July 1. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Plum would include:Multiple ChoiceA credit to a liability and a debit to a prepaid expense for $2,375.A debit to a prepaid expense and a credit...

On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits...

On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will the balance be in the Prepaid Insurance account on the Balance Sheet for the current year ended December 31? Select one: A. $1,000. B. $2,400. C. $1,400. D. $400. E. $1,200.

On July 1 of the current calendar year, Plum Co. paid $7,600 cash for management services...

On July 1 of the current calendar year, Plum Co. paid $7,600 cash for management services to be performed over a two-year period beginning July 1. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Plum would include: Multiple Choice A debit to an expense and a credit to a prepaid expense for $5,700. A debit to a prepaid expense...

Prepare journal entries for the following transactions. 1. Paid 1 year rent in advance for $2,000....

Prepare journal entries for the following transactions. 1. Paid 1 year rent in advance for $2,000. 2. Hired a worker to be paid $500 per week, starting next week. 3. Purchased equipment for $3,000. Paid $800 in cash, and the remainder to be financed at $500/week. 4. Paid a worker the first weeks wages. 5. Received a bill of $150 to be paid on the first of the current month. 6. Issued stock valued at $35,000. 7. Paid a dividend...

Subjects